m. 


II 


THE  NORMAL 
School  Quarterly 


Senes  9 


October,  1910 


Number  37 


Our  Money  History 

By 

O.  L.  Manchester 
UNIVERSITY  OF  ILLINOIS 

AUG  251915 

PRESIDENT’S  OFFICE 


Copyright  1906 
By  O.  L.  Manchester 
Reprinted  1910 


1 


Enterd  August  18,  1902.  at  Normal,  Illinois,  as  second-class  matter, 
under  Act  of  Congress  of  July  16.  1894. 

PUBLISHT  BY  THE  ILLINOIS  STATE 
NORMAL  UNIVERSITY,  NORMAL,  ILLINOIS 


Normal  School  Quarterly 


Publisht  by 

the  Illinois 

State  Normal  University , 

Normal,  Illinois 

Series  4 

OCTOBER, 

1910 

No.  37 

OUR 

MONEY 

HISTORY 

The  Colonial  Period 

Scarcity  The  early  colonists  brought  with  them  to  America  little 
of  Coin.  coin.  Some  was  acquired,  as  the  colonial  exports  grew,  in 
the  settlement  of  trade  balances.  Thru1  the  trade  with  the  West 
Indies  there  came  into  circulation  a Spanish  silver  dollar,  destind 
a century  or  two  later  to  be  the  model  of  our  present  silver  dollar. 
As  the  colonists  were  mostly  from  England,  they  thought,  so  far  as 
money  matters  were  concernd,  in  English  pounds,  shillings,  and 
pence,  tho  there  were  never  many  such  coins  in  general  circulation. 
The  Spanish  dollar  came  to  be  considerd  worth  six  shillings  in  New 
England  and  eight  shillings  in  New  York.  The  pieces  were  often 
much  worn  and  dipt.  At  one  time  various  colonies  vied  with  each 
other  in  rating  this  dollar  high,  in  the  vain  hope  of  enticing  it  with- 
in their  borders.  Such  attempts  resulted  in  the  readjustment  of 
prices  of  commodities.  Queen  Anne  tried,  without  success,  to  fix  and 
hold  the  value  of  the  dollar  at  six  shillings.  Various  laws  were  past 
prohibiting  the  export  of  coin. 

For  a few  years  Massachusetts  coind  a silver  piece,  known  as  the 
pine  tree  shilling.  In  general,  however,  coin  remaind  scarce  thruout 
the  colonial  period  tho  at  times  in  seaport  towns  considerable  was  in 
circulation.  The  little  foren  coin  that  found  its  way  into  the  country 
was  quickly  hoarded  against  an  emergency  or  was  used  to  purchase 
luxuries  from  abroad. 

Tobacco  In  spite  of  the  furious  Counterblast  to  Tobacco  of  James  I, 
Money  in  in  spite  of  import  duties  laid  on  it  in  England,  tobacco 
Virginia,  speedily  became  the  all-important  crop  of  Virginia.  Other 
crops  were  neglected;  the  streets  and  public  squares  of  Jamestown  are 
described  as  at  one  time  planted  with  it;  in  the  period  preceding  the 


1 The  rules  of  the  Simplified  Spelling  Board  are  followd. 


2 


The  Normal  School  Quarterly 


Revolutionary  War  the  annual  export  of  the  colony  is  said  to  have 
averaged  55,000,000  pounds.  Thruout  the  colonial  period  the  culture 
of  tobacco  was  the  industrial  life  and  determind  largely  the  social  life 
of  the  people  of  Virginia.  Most  of  the  laws  of  the  colony  had  to  do  * 
with  tobacco;  to  raise  it  slaves  were  introduced;  the  prosperity  its 
culture  brought  sowd  the  seeds  of  independence;  and  attempts  by  the 
home  government  to  tax  it  nurtured  the  growth  of  liberty  in  the 
New  World.  And  to  the  time  of  the  Revolution  this  staple  product 
was  Virginia’s  chief  medium  of  exchange.  In  tobacco  the  young  men 
paid  the  transportation  charges  for  the  girls  who  came  over  to  be 
their  wives;  in  it  the  preacher  got  his  tithes;  in  it  absentees  from  di- 
vine service  were  fined;  it  was  receivd  for  taxes,  and  tho  at  various 
times  other  articles  were  temporarily  likewise  honord,  yet  tobacco 
was  the  chief  medium  of  exchange  and  the  most  constant  legal-tender 
for  dets. 

A good  money  must  be  uniform  in  quality.  Tobacco  clearly  was 
not,  for  we  find  the  Virginia  Company  directing  the  colonial  author- 
ities to  provide  for  the  burning  of  all  “base  and  rotten  stuff;”  it  was 
provided  later  by  law  that  no  uninspected  tobacco  be  exported.  A 
good  money  must  be  handy;  but  we  find  that  tobacco  had  to  be  rold 
to  market  in  hogsheds  that  had  wooden  spikes  in  the  ends  for  axles, 
rold  thru  mud,  mire,  and  stream,  the  driver  camping  at  night  with 
his  tresure  by  the  roadside.  Warehouse  certificates  were  issued  to 
owners  and  past  from  hand  to  hand  in  place  of  the  tobacco,  and  the 
penalty  for  counterfiting  these  certificates  was  “deth  without  clergy.” 

A good  money  should  not  deteriorate  with  age;  yet  it  was  finally  pro- 
vided that  tobacco  certificates  should  not  be  legal-tender  for  longer 
than  eighteen  months  from  the  time  of  their  issue.  A good  money 
should  remain  stable  in  value  from  year  to  year;  if  it  depreciates  it 
wrongs  creditors,  and  if  it  appreciates  it  wrongs  detors.  Tobacco  was 
worth  3s.  in  1619  and  in  1628;  9d.  in  1633;  3d.  in  1639;  20d.  in  1641. 
During  most  of  the  colonial  period  the  production  of  tobacco  increast 
rapidly,  the  foren  demand  increast  not  so  rapidly,  and  the  tendency 
of  tobacco  prices  was  downward.  Strenuous  efforts  were  made  to 
keep  them  up.  It  was  provided  that  only  so  many  plants  should  be 
tended  per  family  or  per  poll,  that  only  so  many  leaves  should  be 
pickt  from  each  plant,  that  the  poorer  grades  and  half  the  good  be 
burned,  that  no  planting  should  be  after  such  or  such  a date,  that  no 
seconds  be  tended,  that  each  man  should  raise  a certain  amount  of 
corn,  that  mechanics  must  not  plant  tobacco,  that  in  Virginia,  Mary- 
land, and  North  Carolina  planting  cease  for  one  year.  One  year  riots 
occurd  and  much  of  the  crop  was  destroyd.  Again  and  again  the 


Our  Money  History 


3 


prices  of  tobacco  were  fixt  by  law.  The  success  attending  efforts  to 
keep  up  the  price  either  by  fixing  it  by  law  or  by  limiting  the  supply, 
was  partial  and  temporary.  The  experience  of  Maryland  with  tobacco 
4 was  similar  to  that  of  Virginia. 

Beaver  as  The  fur  trade  was  of  much  importance  in  the  early  econo- 
Currency.  mic  and  social  history  of  America;  and  of  all  the  furs,  bea- 
ver ruled  supreme.  The  Atlantic  streams  that  flowd  thru  hard-wood 
forests  were  found  to  be  well  stockt  with  beavers.  The  animal’s  manner 
of  life  made  it  an  easy  prey.  The  Plymouth  colony  sent  its  first  ship- 
ment of  beaver  to  England  before  it  had  been  on  American  soil  a year. 
Ere  long  all  Europe  wanted  beaver;  and  beaver  began  to  move  down 
the  rivers  of  Maine,  coastwise  to  the  Massachusetts  settlements;  down 
the  Connecticut  to  Springfield;  the  Hudson  and  the  Mohawk  to 
Albany;  soon,  everywhere,  out  of  unbroken  forests  to  the  outskirts  of 
civilization,  sometimes  seven  or  eight  hundred  miles  to  reach  the 
coast;  thence,  across  the  Atlantic,  where  in  exchange  it  was  as  good 
as  gold.  Scatterd  thru  colonial  history  are  many  references  to  this 
important  trade.  We  read  how  the  white  man  put  his  foot  in  the 
scale  with  his  goods  to  make  them  balance  the  Indian’s  beaver— twen- 
ty beaver  skins  were  demanded  of  the  Mohawks  for  a musket;  we 
read  how  the  trade  aroused  sectional  jelousies,  as  when  New  Eng- 
landers were  forbidden  to  trade  horses  and  cattle  for  beaver  at  Albany, 
or  their  beaver  was  subjected  to  a customs  duty  at  New  York,  or 
when  the  Dutch  were  accused  of  carrying  off  15,000  to  20,000  beaver 
skins  a year  from  their  Connecticut  river  trade.  French  Canadians 
smuggled  their  beaver  skins  over  the  line  to  Albany.  We  read  of 
fluctuations  in  value  as  mesurd  in  the  money  of  account,  of  attempts 
to  fix  the  value,  of  legal-tender  provisions,  of  prices  of  almost  every- 
thing fixt  in  beaver:  in  1633  8 lbs.  of  tobacco,  4 bu.  of  salt,  40  lbs.  of 
dried  fish,  2 bu.  of  corn,  15  lbs.  of  butter,  or  3 bu.  of  rice  exchanged 
for  1 lb.  of  beaver.  As  late  as  the  middle  of  the  eighteenth  century 
shipments  of  beaver  were  occasionally  made  to  England;  yet  the  im- 
portance of  the  trade  had  ceast  long  before,  only  to  reappear  later 
spasmodically,  here  and  there,  in  western  frontier  life. 

Wampum  With  their  tools  of  stone,  out  of  clams,  oyster,  and  perhaps 
among  the  some  other  shells, the  Indian  tribes  along  the  coast, especial- 
Indians.  ly  those  on  or  in  the  vicinity  of  Long  Island  fashiond  little 
shell  cylinders, a quarter  of  an  inch  long  and  one-eighth  of  an  inch  thru; 
they  polisht  these, and  laboriously  bored  them  thru  lengthwise,  with  awls 
of  flint.  Shell-heaps  with  such  awls  in  them  have  been  found  along  the 


4 


The  Normal  School  Quarterly 


coast)  as  far  north  as  Maine.  There  were  black  beads  and  white  beads; 
the  former,  cut  necessarily  from  a certain  spot  in  a shell,  as  from  the 
point  of  muscular  attachment  in  the  clam  shell,  being  the  scarcer  and 
the  more  precious. 

The  Indian  strung  his  shell  beads  on  tendons,  buckskin  cords,  or 
fibers  of  hemp;  he  wore  such  strings  of  wampum  or  peage  around  his 
wrists,  his  neck,  or  as  a sash;  he  sewd  the  beads,  with  pretty  inter- 
mingling of  colors  and  in  ornamental  designs,  on  moccasins  and  shirts; 
the  chief’s  deerskin  belt  was  decorated  with  perhaps  ten  thousand 
beads.  In  short,  wampum  was  the  most  precious  thing  the  red  man 
had;  it  was  his  gold,  his  silver,  his  medium  of  exchange.  The  brave 
slept  with  it  under  his  hed.  Its  possession  brought  distinction  and  hon- 
or. It  came  to  have  ceremonial  and  symbolic  uses.  The  chief  strength- 
end  the  fidelity  of  his  warriors  thru  presents  of  wampum;  and 
wampum  in  the  possession  of  a chief  was  as  significant  of  love  and 
labor  on  the  part  of  his  followers  as  are  the  crown  jewels  of  a modern 
monarch.  Belts  of  wampum  reinforced  words  of  sympathy,  apologies, 
summons  to  war,  and  messages  of  peace.  “This  belt  preservs  my 
words”,  was  an  Iroquois  formula.  We  are  told  that  braves  kickt 
around  in  contempt  a belt  that  provokt  their  anger.  Few  indeed  were 
the  important  inter- tribal  transaction  without  an  interchange  of 
wampum  belts;  and  such  belts  were  jelously  garded  by  especially  ap- 
pointed keepers  for  generations;  they  became  mnemonic  emblems,  re. 
cords  from  which  wampum-keepers  and  aged  braves  red  in  councils 
the  history  of  their  tribe. 

Wampum  as  Books  prone  to  emphasize  the  blood-and-thunder 
Colonial  side  of  history  have  said  little  or  nothing  of  a bred- 

Money.  and-butter  relation  that  existed  between  the  red  and 
the  white  man.  The  Indian  wanted  the  white  man’s  hoes,  his  guns, 
bullets,  his  blankets  and  coats,  his  liquors,  and  scores  of  articles  of  or- 
nament; the  colonist  needed  the  Indians  labor,  his  venison,  his  corn,  his 
land,  and  his  furs.  Wampum  became  the  medium  of  exchange.  It 
drew  beaver  out  of  the  dense  forest.  The  island  upon  which  fashion- 
able Newport  stands  cost  the  white  man  only  forty  fathoms  of  beads. 

Well-nigh  indispensible  in  the  Indian  trade,  wampum  easily  be- 
came a full  fledged  money  among  the  colonists  themselvs.  These 
points  are  instructiv  as  to  its  use:  (I)  The  colonist  had  little  or  no 
use  for  wampum  himself;  he  took  it  expecting  to  pass  it  on  in  ex- 
change for  something  he  could  use;  it  was  good  for  beaver,  and  beaver 
was  good  for  the  comforts  and  the  luxuries  of  the  Old  World.  Thus 
wampum  attaind  a circulation  thruout  New  England  and  the  Middle 


Our  Money  History 


5 


Colonies  and,  to  some  extent,  even  as  far  south  as  Virginia,  principally 
because  it  was  redeemable  in  beaver.  (2)  After  wampum  had  become 
establishtinpractisasmoney,  the  Colonial  governments  legalized  and 
regulated  its  use;  they  made  it  legal-tender,  provided  how  it  should  be 
strung,  regulated  its  quality,  and  tried  to  fix  its  value.  Wampum  was 
made  legal-tender  in  Massachusetts,  in  1637,  for  all  sums  under  12  pence; 
in  1641,  for  all  sums  under  10  pounds;  and  two  years  later  for  sums  un- 
der 40  shillings.  Tho  the  manufacture  or  the  “coinage’’  of  wampum 
from  first  to  last  remaind  in  private  hands,  there  was  soihe  state  con. 
trol— as  when  it  was  provided  in  Massachusetts  that  beads  should  be 
strung  in  eight  specified  parcels,  convenient  for  change,  or  that  beads 
should  be  “intire,  without  breaches,  both  the  white  and  the  black 
without  deforming  spots.”  The  ordinances  of  New  Netherland  com- 
plain that  imperfect  beads  forced  out  of  circulation  elswhere  [i.  e.  in 
New  England]  find  their  way  to  New  Netherland  and  drive  out  those 
of  better  quality;  they  prescribe  the  reduced  rates  at  which  loose  and 
imperfect  beads  shall  be  accepted,  and  penalties  for  refusing  to  accept 
such  beads  at  the  rates  prescribed.  Colonial  laws  attempted  to  fix 
the  rates  in  the  moneys  of  account  at  which  wampum  should  be  taken: 
thus,  in  1637,  Massachusetts  declared  that  six  beads  should  pass  for 
one  penny;  Connecticut  took  four  for  a penny;  and  about  the  same 
time  in  New  Netherland  four  past  for  a stiver, which  was  roughly  equiv- 
alent to  a penny.  The  fathom,  equivalent  to  five  shillings,  or  sixty 
pence,  and  consisting  of  240  or  of  360  beads,  was  the  commonest  wam- 
pum unit.  (3)  By  1640  the  popularity  of  wampum  was  on  the  wane; 
by  1665  it  was  quite  completely  discredited  as  money  both  in  New  Eng- 
land and  in  New  Netherland;  yet  instances  are  given  of  its  use  down 
to  the  close  of  century.  The  story  of  the  decline  may  be  gleand 
from  the  ordinances  of  New  Netherland.  An  ordinance  of  1641  shows 
that  four  beads  then  past  for  a stiver.  This  ordinance,  a resolu- 
tion in  1647,  and  an  ordinance  of  1650,  all  complain  of  rough,  unpolisht 
stuff,  imperfect,  broken  beads,  beads  of  stone,  glass,  horn  and  wood; 
and  fix  a reduced  rate  at  which  such  beads  are  to  circulate.  Ordinances  of 

1657  and  1658  lament  “the  great,  excessiv,  and  intolerable  dearness  of 
all  sorts  of  necessary  commodities  and  household  supplies;”  declare 
that  prices  in  wampum  are  30  40  per  cent  higher  than  in  beaver,  at- 
tribute this  to  the  abundance  of  wampum,  and  order  that  wampum 
thereafter  pass  at  eight  beads  for  a stiver.  An  ordinance  later  in 

1658  declares  that  there  is  a difference  of  80-100  per  cent  between 
wampum  aud  beaver  prices,  and  orders  store-keepers  to  sell  certain 
necessaries  at  specified  prices  in  silver,  in  beaver,  and  in  wampum; 
thus,  the  baker  is  to  sell  a 2-lb.  white  loaf  for  4 stivers  in  silver,  6 in 


6 


The  Normal  School  Quarterly 


beaver,  8 in  wampum.  An  official  document  speaks  of  wampum  in 
1659  as  “a  currency  utterly  valueless,  except  among  New  Netherland 
Indians  only.”  The  rate  at  which  the  beads  were  receivd  at  the  com- 
pany’s counting  house  was  reduced  in  1662  from  16  to  24  for  a stiver. 
Thus  wampum  was  worth  only  one-sixth  what  it  had  been  twenty 
years  before. 

At  least  three  things  contributed  to  the  overthrow  of  bead  money: 
it  was  no  longer  redily  redeemable  in  beaver  when  the  Indian  trade 
declined;  the  tools  of  the  white  man  flooded  the  markets  with  coun- 
terfits  and  multiplied  the  supply;  the  trade  with  the  West  Indies 
brought  to  the  seaport  towns  considerable  quantities  of  silver  coin. 

Other  The  subject  of  colonial  currency  is  complicated' by 

Commodity  the  fact  that  the  various  colonies  thruout  theseven- 

Money.  teeth  century  were  incessantly  passing,  amending, 
and  repealing  laws  providing  that  different  staple  commodities 
should  be  receivable  for  taxes  or  legal -tender  in  the  payment  of  dets. 
It  was  the  usual  practis  to  fix  by  law  the  prices  at  which  such  com- 
modities should  be  receivd.  Payment  in  country  produce,  such  as 
corn,  oats,  wheat,  rye,  barley,  rice,  peas,  beef,  pork,  cattle,  was 
cald  “country  pay,”  and  was  especially  common.  The  early  records 
of  Harvard  show  that  very  little  coin  was  receivd  for  tuition;  even 
welthy  men  paid  the  tuition  of  their  sons  in  country  pay. 

Corn  was  legal-tender  in  Massachusetts,  1631—1670,  the  authorities 
fixing  the  price  each  year  at  which  it  should  be  receivd.  One  Con- 
necticut decree  red:  “No  man  shall  refuse  Indian  corn  at  2s.  6d.  per 
bu.  for  any  contract.”  Cattle  were  a common  legal-tender  and  so  it 
has  been  said,  “Money  in  Massachusetts  walkd  into  the  public  treas- 
ury.” Great  difficulty  was  experienced  in  keeping  old  and  lean  ani- 
mals out.  All  sorts  of  articles  were  legal-  tender  in  Rhode  Island  but 
at  one  time  an  attempt  was  made  to  make  wool  a standard  and  reg- 
ulator at  12d.  per  pound.  It  was  often  the  practis  in  the  colonies 
to  discount  prices  in  country  pay  for  coin.  Many  articles  that  have 
not  been  mentiond  were  currency  at  different  times  in  different 
places:  thus,  rice  certificates  in  South  Carolina;  iron  bars  in  the  slave 
trade;  milk  pails  were  once  taken  as  legal-tender  by  the  town  of 
Hingham.  Country  pay  was  becoming  uncommon  about  the  close  of 
the  seventeenth  century.  The  first  tax  rate  ever  levied  in  money  in 
Massachusetts  was  in  1678.  Constant  attempts  were  made  to  regu- 
late wages  as  well  as  prices  of  commodities.  Thus,  in  Massachu- 
setts we  find  the  wages  of  carpenters,  joiners,  etc.,  fixt  at  2s. 
per  day.  Fines  were  provided  for  those  who  gave  or  took 


Our  Money  History 


7 


more.  In  1636  power  was  given  the  towns  to  fix  wages  within  their 
borders;  yet  four  years  later  the  general  court,  prices  having  fallen,  en- 
joind  laborers  to  reduce  their  demands  accordingly.  Every  statute  to 
fix  wages  or  prices  faild  or  was  of  very  doubtful  success,  but  new  stat- 
utes were  past  almost  continuously. 

Some  Mone-  Money  is  an  intermediate  article  in  a trade,  a me- 
tary  Principles,  dium  in  exchange.  An  article  comes  to  be  money  in 
a community  when  people  in  general  come  to  take  it  in  exchange,  not 
expecting  to  consume  it  but  expecting  to  pass  it  on  for  something  they 
do  wish  to  consume.  A medium  in  exchange  becomes  a denominator 
of  all  values  and  a standard  for  deferd  payments.  To  perform  these 
functions  well  it  must  be  capable  of  mesuring  all  values  without  be- 
ing unhandy,  and  it  must  remain  stable  in  value.  The  price  of  any  com- 
modity is  naturally  that  at  which  demand  and  supply  are  equalized, 
the  price  at  which  people  stand  redy  to  take  just  the  same  quantity 
of  the  article  that  other  people  stand  redy  to  part  with;  if  com- 
petition is  free  this  price  will  tend  to  equal  the  cost  of  produc- 
tion of  the  portion  of  the  commodity  produced  at  the  greatest  cost, 
provided  that  portion  is  necessary  to  make  the  supply  equal  to  the 
demand.  In  trying  to  fix  the  prices  at  which  staple  commodities 
should  be  exchanged,  or  the  rates  at  which  they  should  be  legal-tender, 
or  the  rates  of  wages  per  day,  the  colonists  disregarded  this  natural 
law  of  price  or  value.  The  result  was  that  actual  prices  did  not  long 
conform  to  legal  ones.  When  several  commodities  were  made  legal- 
tender  at  fixt  rates,  detors  naturally  paid  their  dets  in  that  article 
whose  legal  price  most  exceded  its  natural  value. 

Colonial  All  the  colonies  issued  more  or  less  paper  money.  Massa- 
Paper  chusetts  began  it  in  1690  to  pay  for  an  unsuccessful  military 
Money,  expedition.  But  paper  money  was  also  issued  by  Massa- 
chusetts to  meet  ordinary  expenses,  to  loan  to  individuals  or  com- 
panies, or  for  the  encouragement  of  enterprizes  deemd  to  be  of  public 
value.  The  value  of  the  paper  stedily  sank  until  in  1749  it  took 
eleven  pounds  in  paper  to  buy  exchange  on  England  for  one  pound  in 
silver.  Then  the  Louisburg  ransom  money  receivd  from  England  en- 
abled Massachusetts  to  redeem  her  paper  at  the  rate  of  one  pound 
sterling  for  eleven  pounds  of  paper  money. 

In  Rhode  Island,  the  paper  money  epidemic  was  the  most  destruc- 
tiv.  The  favorit  scheme,  tried  also  in  other  colonies,  was  that  of  “a 
bank,”— a bank  ment  “simply  a batch  of  paper  money,”  issued  by  the 
government,  ordinarily  loand  to  private  individuals,  secured  by  mort- 
gages on  land  or  otherwise,  to  be  repaid  in  ten  or  twenty  years,  the  in- 


8 


The  Normal  School  Quarterly 


terest  to  defray  the  expenses  of  the  colony.  The  security  was  usu- 
ally insufficient,  the  interest  and  principal  were  often  lost.  When 
old  issues  put  in  circulation  by  the  government  had  depreciated  badly, 
new  issues  were  orderd,  one  bill  of  the  “new  tenor”  to  be  exchanged 
for  several  of  the  old.  So  there  were  often  several  tenors  in  circula- 
tion at  the  same  time,  “of  different  degrees  of  worthlessness.” 

Connecticut’s  experiments  with  paper  money  were  at  first  conser- 
vativ,  the  issues  were  only  for  colonial  expenses,  their  redemption  was 
provided  for  by  taxes,  and  the  depreciation  was  not  excessiv.  Later, 
however,  as  safegards  came  to  be  disregarded,  and  issues  increast, 
depreciation  became  pronounced;  in  1755  it  took  88  shillings  in  paper 
to  buy  one  ounce  of  silver.  The  New  Hampshire  paper  shilling  was 
worth  half  a penny.  In  South  Carolina  exchange  was  8 to  1 in  1740; 
in  North  Carolina  14  to  1;  in  Virginia,  Pennsylvania,  New  York,  and 
Maryland,  it  ranged  from  1.20—2  to  1.  New  Jersey  was  also  conserv- 
ativ  in  her  issues. 

The  issue  of  paper  money  by  the  colonies  was  a constant  cause  of 
friction  between  them  and  England  and  one  cause  of  the  bad  feeling 
that  led  to  the  separation.  The  colonial  governors  were  often  under 
instructions  to  veto  bills  for  paper  issues,  but  when  they  exercized 
their  authority  they  were  apt  to  find  that  the  colonial  assemblies  re- 
taliated by  refusing  to  vote  the  means  of  their  support.  About 
the  middle  of  the  eighteenth  century  Parliament  past  laws  forbidding 
paper  issues  excepting  in  case  of  war  or  for  current  expenses, 
and  forbidding  that  any  bills  issued  should  be  declared  legal-tender. 
The  exceptions  left  the  chances  for  some  further  issues.  It  has  been 
estimated  that  colonial  paper  to  the  amount  of  ten  or  twelve  millions 
of  dollars  was  still  in  circulation  in  1774.  In  preparation  for  the  war 
all  the  colonies  issued  paper. 

Some  private  paper  circulated  at  times  in  the  colonies.  In  1733 
the  merchants  of  Boston  united  to  issue  notes  redeemable  in  silver 
in  ten  years.  In  1741  a grand  private  Land  Bank  was  projected.  A 
company  was  formd  that  proposed  to  issue  a great  quantity  of  notes, 
to  be  redeemd  in  twenty  years  “in  the  manufactures  of  the  province” 
and  secured  by  land  mortgages.  The  scheme  was  fought  by  the  gover- 
nor of  Massachusetts,  and  finally  forced  under  an  act  of  Parliament  to 
wind  up  its  affairs.  Most  of  the  projectors  were  ruind  when  required 
to  redeem  the  outstanding  notes,  each  one  being  liable  to  the  full  ex- 
tent of  his  property.  This  bank  caused  great  political  excitement 
and  much  bad  feeling.  Other  such  schemes  were  tried  at  other  times. 


Our  Money  History 


9 


Under  the  Articles  of  Confederation 

Peeper  During  the  Revolution  the  various  states  issued  paper  to 

Issues  the  following  amounts  in  millions  of  dollars,  round  num- 
by  States,  bers;  Virginia,  128;  North  Carolina,  33;  South  Carolina,  33; 
Pennslyvania,  4;  Massachusetts,  nearly  4;  other  states,  smaller 
amounts.  After  the  war  seven  of  the  states— Rhode  Island,  New 
York,  Pennsylvania,  New  Jersey,  North  and  South  Carolina,  and 
Georgia— continued  their  paper  issues.  Shays’s  rebellion  was  largely 
a result  of  agitation  for  paper  issues  in  Massachusetts. 

The  The  Continental  Congress  had  no  power  to  tax.  It 
Continental  could  advise  that  each  state  raise  a certain  amount  for 
Currency,  support  of  the  war.  The  states  complied  or  not,  as  they 
pleased.  The  country  was  engaged  in  a terrible  struggle  with  a power- 
ful adversary.  To  borrow  abroad  seemd  impossible.  It  seemd  equally 
impossible  to  borrow  any  large  amount  at  home.  The  people  were  ac- 
customd  to  paper  money,  yet  a different  generation  than  that  which 
had  experienced  its  evils  was  on  the  stage,  and  the  lessons  of  the  past 
were  forgotten,  or  unheeded,  or  the  resort  to  a desperate  expedient 
was  deemd  inevitable.  Congress  began  the  issue  of  paper  money  with- 
out delay.  Almost  alone,  Pelatiah  Webster,  of  Philadelphia,  pleaded 
for  taxation  insted.  “Do  you  think,  gentlemen,”  retorted  a member 
of  Congress  indignantly,  “that  I will  consent  to  load  my  constituents 
with  taxes,  when  we  can  send  to  our  printer  and  get  a wagon-load  of 
money,  one  quire  of  which  will  pay  for  the  whole?” 

The  first  issue  was  within  a week  after  the  battle  of  Bunker  Hill. 
Fifteen  millions  Were  out  before  the  Declaration  of  Independence  was 
signd.  It  is  not  agreed  just  what  the  total  issue  during  the  war 
was— possibly  it  was  $350,000,000  tho  probably  no  more  than  $200,000,- 
000  was  out  at  any  one  time.  The  largest  issues  were  in  1778,  1779, 
1780. 

The  Story  From  different  authorities  it  may  be  gatherd 
of  the  that  the  depreciation  of  the  bills  was  about  as  fol- 
Depreciation.  lows:  at  the  end  of  1776  they  were  exchanging  for  silver, 
$2.00  for  $1.00;  at  the  close  of  1777,  $4.00  for  $1.00;  at  the  close  of  1778,  $8.00 
for  $1.00;  at  the  close  of  1779,  $40.00  for  $1.00;  at  the  end  of  1780,  $75.00 
for  $1.00;  during  the  next  year  the  ratio  was  $500  or  $1,000  for  $1.00. 
The  bills  were  now  a laughing-stock.  A barber  shop  was  paperd 
with  them;  a dog  was  coated  with  tar  and  coverd  with  them;  sailors 
had  suits  of  clothes  made  out  of  their  pay.  They  were  “not  worth  a 
continental.”  In  1780  Congress  provided  for  a new  tenor,  in  the 


10 


The  Normal  School  Quarterly 


shape  of  six-year,  interest-bearing  certificates,  payable  by  the  states 
and  guaranteed  by  Congress,  the  old  notes  to  be  receivd  in  exchange 
for  the  new  certificates  at  the  rate  of  40  for  1.  The  certificates  soon 
sank  to  the  place  where  it  took  eight  dollars  in  them  to  buy  a silver 
dollar.  Thus  a man  with  $320  in  old  tenor  notes  could  get  $8.00  in 
the  new  tenor  or  $1.00  in  silver.  In  1790,  under  the  Constitution,  the 
certificates,  so  far  as  they  were  then  in  existence,  were  receivd  in 
subscription  for  the  new  bonds;  the  old  tenor  notes  likewise,  but  at  the 
rate  of  100  for  1. 

Att©mpts  The  first  notes  issued  were  not  legal-tender— Congress 
to  Prevent  had  not  power  to  make  them  so.  Later  issues  were 
Depreciation,  made  so  by  the  states  at  the  request  of  Congress.  But 
legal-tender  provisions  did  not  keep  silver  from  going  to  a premium. 
Congress  denounced  all  who  should  refuse  to  receive  the  bills,  resolvd 
that  they  were  enemies  of  their  country  and  should  be  precluded  from 
trade  and  intercourse  with  other  people.  Washington  wanted  mono- 
polizers, forestalled,  and  engrossers  hunted  down  as  pests  to  society, 
and  their  leaders  hanged  on  gallows  five  times  as  high  as  the  one  pre- 
pared by  Hainan.  Mobs  took  affairs  into  their  hands  and  disciplind 
offenders.  Goods  needed  by  the  army  were  taken  by  force  and  paid 
for  afterwards  in  paper.  Price  conventions  were  held,  fixing  the  prices 
that  should  be  paid  for  imports  and  the  advance  upon  these  that 
retailers  might  charge.  When  these  prices  did  not  last,  new  conven- 
tions fixt  new  prices  at  twice,  or  four,  or  eight  times  the  old.  Nothing 
was  left  undone  in  the  way  of  coercion  or  of  fixing  penalties  to  keep 
the  value  of  the  currency  up.  Congress  resented  in  the  strongest 
possible  terms  all  insinuations  that  the  paper  might  never  be  redeemd. 
In  the  end,  when  it  did  become  worthless,  the  attempt  was  made  to 
get  along  without  any  money  and  requisition  in  supplies  were  made 
upon  the  states.  This  plan,  too,  practically  faild. 

Consequences  of  It  has  been  claimd  by  some  in  defense  of  Con- 
Paper  Issues.  gress  and  its  paper  issues  that  taxation  or  borrow- 
ing was  impossible;  that  the  issue  of  paper  really  operated  as  a tax 
and  fell  most  heavily  upon  those  who  had  the  most;  that  to  have 
redeemd  it  eventually  would  have  done  little  to  right  matters  inas- 
much as  the  holders  of  bills  at  that  time  were  not  the  only  ones  who 
had  lost  thru  them— all  having  sufferd  thru  them  who  had  ever  kept  any 
of  them  for  any  length  of  time.  In  answer,  it  is  claimd  that  the 
people  in  their  patriotism  and  enthusiasm  would  have  submitted  to 
taxation  if  it  had  been  provided  for  at  the  start;  that  borrowing  would 
have  been  possible  if  systematic  taxation  had  been  arranged  for;  that 
there  was  no  just  principle  of  taxation  followd  in  such  an  apportion- 


Our  Money  History 


11 


ment  of  the  burdens  of  war.  The  following  quotation  is  from  Webster: 
“We  have  sufferd  more  from  this  cause  than  from  every  other  cause 
or  calamity.  It  has  killd  more  men,  pervaded  and  corrupted  the  choicest 
interests  of  our  country  more,  and  done  more  injustis  than  even  the 
arms  and  artifices  of  our  enemy.” 

From  the  Adoption  of  the  Constitution  to  the  Civil  War 

Acts  of  Gold.— This  Act  provided  for  the  coinage  of  the  eagle,  the 

1792.  half-eagle,  and  the  quarter-eagle.  The  eagle  containd  247.5 
grains  of  pure  gold  and  270  grains  of  standard  (11-12  fine)  gold.  The 
other  pieces  were  of  proportional  weight  and  of  the  same  fineness. 

Silver.— Dollars,  halvs,  quarters,  dimes,  and  half-dimes  were  pro- 
vided for.  The  silver  dollar  was  modeled  after  the  Spanish  milled 
dollar  and  containd  371.25  grains  of  pure  and  416  grains  of  standard 
silver.  The  smaller  pieces  were  of  proportional  weight  and  the  same 
fineness.  It  is  worthy  of  note  that  the  amount  of  the  pure  silver  in 
the  silver  dollar  remains  the  same  today. 

Copper  cents  and  half-cents  were  authorized.  All  the  gold  and 
the  silver  coins  were  of  unlimited  legal  tender.  Coinage  was  free  and 
gratuitous.  This  ratio  of  coinage,  which  it  will  be  seen  was  just  15: 
1,  in  comparison  with  the  French  ratio  of  15.5  : 1 establisht  later,  and 
incomparision  with  the  market  ratio  insucceding  years,  slightly  over- 
valued silver;  one  ounce  of  gold,  worth  in  America  only  15  ounces  of 
silver,  when  taken  to  France  would  buy  15.5  ounces  of  silver,  and  this 
silver  brought  back  to  the  United  States  could  be  exchanged  for  more 
gold  than  that  used  to  buy  it.  In  consequence  of  this  profit  in  ex- 
porting gold,  our  gold  coins  refused  to  stay  in  the  country,  and  only 
about  $12,000,000  in  gold  was  coind  up  to  1834.  Our  money,  so  far  as 
coins  are  concernd,  was  nearly  all  silver. 

Acts  of  1834  By  the  Act  of  1834  the  gold  eagle  contained  232  grains 

and  1837.  of  pure  gold  and  258  grains  of  standard  gold  and  was 
thus  nearly  9-10  fine.  In  1837  2-10  of  a grain  was  added  to  the  weight 
of  pure  gold  in  the  eagle  to  make  it  exactly  9-10  fine.  Corresponding 
changes  were  made  in  the  other  gold  coins  by  the  Acts  of  1834  and  1837 . 
In  1837  the  alloy  in  the  silver  coins  was  changed  slightly,  the  silver 
dollar  now  containing  412.5  grains  of  standard  silver, and  the  silver  coins 
being  9-10  fine.  The  ratio  of  coinage  was,  in  consequence  of  these  acts,  fixt 
at  15.988  : 1.  This  ratio  undervalued  silver,  it  refused  to  stay  in  the  coun- 
try, the  coinage  of  the  dollar  was  stopt,  and  the  subsidiary  coins  were 


12 


The  Normal  School  Quarterly 


finally,  by  the  Act  of  1853,  reduced  in  weight  (half-dollar  made  to 
contain  192  grains,  etc.),  and  made  legal-tender  to  only  five  dollars. 
Gold  thus  became  the  principal  metal  in  circulation.  It  is  an  eco- 
nomic law,  called  Gresham’s  law  that  a poor  money  drives  out  a good 
money:  both  before  and  after  1834  it  was  the  money  that  was  not  quite 
worth  its  face  value  that  drove  out  the  other. 

Double  eagles  and  dollars  of  gold  were  authorized  in  1849  but  the 
coinage  of  the  latter  was  stopt  in  1890.  At  different  times  various 
foren  coins  have  been  current  in  the  United  States.  Many  laws  have 
been  past  regulating  the  rate  at  which  the  several  coins  should  pass. 
They  were  not  all  deprived  of  legal-tender  quality  until  1857. 

United  States  During  the  period  under  discussion  tresury  notes 
Tresury  were  issued  many  times  by  the  United  States.  The 

Notes.  second  war  with  England  was  the  occasion  of  issues 

1812-15  as  the  war  with  Mexico  was  of  issues  1846-47.  The  crises  of  1837 
and  1857  gave  rise  to  issues.  The  operation  of  the  Compromise  Tariff 
made  issues  necessary  in  the  early  forties;  the  available  balance  of  the 
tresury  in  May,  1841,  having  sunk  to  about  $26,000.  It  is  hardly  proper 
to  look  upon  any  of  these  so-cald  tresury  notes  as  money.  They  were 
in  large  denominations  and  did  not  circulate  much.  With  one  excep- 
tion they  bore  interest,  were  payable  to  order,  and  were  utterd  at  par. 
They  were  not  legal-tender  between  individuals  but  were  receivable 
for  customs,  taxes,  public  lands,  etc. 

Banks  of  the  Under  the  Articles  of  Confederation,  the  general 
United  States,  government  had  charterd  the  Bank  of  N orth  America. 
It  issued  some  notes,  which  circulated  well.  The  bank  ran  only  a short 
time  under  its  federal  charter  and  then  was  incorporated  under  the 
laws  of  Pennsylvania.  The  First  Bank  of  the  United  States  was  char- 
terd in  1791  for  twenty  years  and  it  came  to  an  end  in  1811,  when  bills 
to  renew  its  charter  were  defeated.  The  Second  Bank  of  the  United 
States  was  charterd  for  twenty  years  in  1816.  The  history  of  these 
banks,  excepting  so  far  as  their  note-issues  are  concerned,  the  story  of 
the  services  they  renderd  the  country,  of  how  they  got  entangled  in 
politics  and  lost  consequently  their  lives— all  this  belongs  rather  to  a 
history  of  finance  and  of  politics  than  to  a history  of  money. 

The  circulation  of  the  First  Bank  was  limited  only  by  a provision 
in  its  charter  that  its  dets,  not  counting  liabilities  for  deposits,  should 
not  excede  the  amount  of  its  capital  stock.  Inpractis,  its  circulation 
was  kept  well  within  bounds,  an  ample  specie  reserv  held,  and  the 


Our  Money  History 


13 


notes,  when  the  career  of  the  bank  ended,  were  settled  in  full.  The 
notes  were  not  legal-tender  but  were  receivable  for  public  dues  so 
long  as  redeemd  in  coin  on  demand.  The  bank  was  located  at  Phila- 
delphia and  had  branches  in  eight  other  cities. 

The  Second  Bank  of  the  United  States  had  the  privilege  of  issu- 
ing notes  to  the  amount  of  its  capital,  $35,000,000.  They  were  re- 
deemable in  coin  on  demand  and  failure  so  to  redeem  them  was  to  be 
punisht  with  a penalty  of  twelve  per  cent  per  annum.  The  notes 
were  receivable  for  all  public  dues.  About  $23,000,000  was  outstand- 
ing at  one  time.  After  the  bank  faild  to  get  a renewal  of  its  charter 
it  was  incorporated  under  the  laws  of  Pennsylvania,  had  a precarious 
existence  for  a few  years,  and  then  went  into  liquidation.  Its  liabili- 
ties were  met  in  full  but  its  stockholders  were  ruind. 

Bank  Circula-  The  New  England  banks  were,  with  some  few 
tion  in  New  exceptions  near  the  close  of  the  period,  charterd 
England.  banks,  incorporated  not  by  general  law  but  by 

special  acts  of  the  various  legislatures.  They  were  thus  legal  mono- 
polies. Their  circulation  was  based  upon  assets,  not  upon  securities 
deposited  with  the  state.  During  the  period  the  restrictions  in  the 
charters  concerning  the  circulation  became  gradually  stricter;  it  came 
to  be  provided  by  law  that  the  circulation  of  a bank  must  not  excede 
100  or  125  per  cent  of  its  capital;  note-holders  of  banks  that  had  faild 
were  given  first  lien  upon  the  assets;  officers  or  stockholders  were  made 
personally  liable  for  notes  unredeemd;  finally,  it  was  provided  that 
specie  reservs  must  be  held  against  circulation.  Such  was  the  gen- 
eral drift  of  legislation  during  the  period  concerning  circulation. 

A system  of  note-redemption  introduced  by  the  Suffolk  Bank  of 
Boston  and  commonly  known  as  the  Suffolk  System,  was  of  great  value 
in  giving  New  England  a good  currency.  In  early  days  the  notes  of 
New  England  country  banks,  being  at  rates  of  discount  in  Boson  de- 
pending upon  the  inconveniences  in  getting  them  home  for  redemption, 
had  driven  the  Boston  banks’  notes  out  of  circulation  in  Boston  itself. 
The  Suffolk  Bank  then  offerd  to  receive  at  par  the'notes  of  such  coun- 
try banks  as  would  keep  deposited  with  it  funds  for  the  redemption  of 
their  notes  and  small  deposits  besides.  The  country  banks  at  first 
promptly  rejected  the  proposition,  considering  that  it  was  a proposal  to 
make  them  pay  for  having  done  exactly  what  they  did  not  want  done. 
Then  the  Suffolk  Bank  began  to  collect  systematically  the  notes  of 
country  banks  and  to  send  them  in  large  quanities  home  for  redemp- 
tion. To  stop  this  the  country  banks  had  to  accept  Suffolk  scheme. 


14 


The  Normal  School  Quarterly 


The  plan  gave  New  England  bank  notes  redy  currency  not  only  in  but 
far  beyond  New  England,  and  the  Suffolk  Bank  exercized  great  power 
for  good  over  the  allied  banks.  In  later  years  the  Bank  of  Mutual  Re- 
demption, establisht  by  the  country  banks  themselvs,  divided  with 
the  Suffolk  Bank,  the  labor  and  protits  of  the  system. 

Scatterd  thruout  the  period  and  specially  during  the  crises  of  1814, 
1837,  and  1857,  there  were  of  course  failures  of  banks  in  New  England; 
yet  the  record  as  a whole  is  an  honorable  one.  New  England  banks 
did  not  suspend  specie  payments  during  the  first  crisis;  during  the 
later  two  they  did. 

Bank  Circu-  The  plan  of  establishing  banks  by  special  charter, 
lation  in  which  was  followd  with  fair  success  in  the  New  England 
New  York.  States,  was  productiv  of  many  evils  in  New  York. 
Whichever  political  party  chanced  to  be  in  power,  it  would  charter  no 
banks  except  for  its  political  friends.  Many  banks  got  charters  by 
bribing  the  legislature.  The  subscription  for  shares  of  stock  after  a 
charter  was  secured,  was  controld  by  commissioners  who  made  polit- 
ical spoils  out  of  their  powers.  Then  a constitutional  amendment  was 
adopted  requiring  a two-thirds  vote  of  the  legislature  before  a bank 
could  be  establisht.  This  simply  made  more  bribery  necessary.  Fin- 
ally, in  1838,  after  a political  revolt  led  by  the  loco-focos  against  mo- 
nopolistic banking  privileges,  a free  banking  law  was  past. 

Before  its  system  of  charterd  banks  was  abandond,  New  York 
tried  the  experiment  of  a safety-fund  for  the  security  of  the  creditors 
of  banks.  Each  bank  paid  a small  per  cent  of  its  capital  into  this 
fund.  When  a bank  faild,  after  its  assets  were  exhausted,  this  fund 
was  applied  to  the  settlement  of  its  dets.  Later  the  law  so  changed 
that  note-holders  had  the  first  claim  among  the  bank’s  creditors.  The 
scheme  was,  upon  the  whole,  a success  altho  the  fund  became  ex- 
hausted during  the  later  days  of  the  experiment  and  the  state  had  to 
extend  temporarily  its  aid  to  meet  promptly  the  claims  of  creditors 
of  several  banks  that  had  faild.  The  state  was  eventually  reimbursd, 
however,  and  not  one  dollar  was  lost  on  the  note  of  a bank  whose 
circulation  was  protected  by  this  safety  fund.  The  fund,  it  would 
seem,  ought  to  have  been  raised  thru  a tax  on  circulation  and  to  have 
been  used  only  to  protect  note  issues. 

Under  the  free  banking  law  of  1838  any  person  or  association  of  per- 
sons could  go  into  the  banking  business  by  depositing  with  the  con- 
troller certain  securities  in  return  for  which  the  controller  furnisht 
unsignd  bank  notes.  This  was  free  banking  insted  of  monopolized 


Our  Money  History 


15 


banking  and  was  circulation  based  on  securities  deposited  insted  of  on 
assets.  The  bank  got  the  interest  on  its  deposited  securites  so  long 
as  it  redeemd  its  notes  on  demand.  The  law  was  very  popular.  Many 
new  banks  were  formd.  Many  failures  occurd  during  the  first  year 
because  poor  securities  had  been  accepted.  During  the  later  years 
failures  were  fewer  and  losses  on  circulation  small. 

Free  Banking  New  York’s  free  banking  law  was  the  model  or  in- 
in  Other  stigation  of  free  banking  laws  in  a score  of  states. 

States.  It  is  possible  to  speak  only  in  a general  way  of  the 
evils  that  resulted.  One  wonders  as  he  reads  of  them  that  such 
things  could  have  happend  hardly  two  generations  ago.  The  ordinary 
career  of  a bank  in  the  Middle  West  or  in  the  South  has  been  de- 
scribed as  something  like  this;  A clique  of  worthless  men  organize 
for  banking  purposes;  they  scrape  together  questionable  securities,  buy- 
ing them  mostly  on  credit,  deposit  them  with  the  state  officials,  get 
in  return  blank  bank  notes,  sign  these  and  with  them  pay  their  secu- 
rities; with  the  balance  of  the  notes,  get  more  securities,  then  more 
notes,  etc.;  their  surplus  of  notes  they  manage  to  buy  things’with,  to 
get  into  circulation  in  some  way;  their  bank  they  locate  in  the  most 
out-of-the-way  place  they  can  find  so  that  it  will  be  next  to  impossible 
for  anyone  to  get  the  notes  home  for  redemption.  If  the  law  requires 
that  capital  be  paid  in  before  the  bank  begins  business,  the  stock- 
holders pay  in  what  is  necessary  and  then  borrow  it  back  on  the  secu- 
rity of  their  stock;  if  a certain  amount  of  specie  must  be  kept  on 
hand,  it  can  be  borrowd  from  a neighboring  bank  when  the  state  in- 
spector comes.  When  the  notes  have  been  kept  out  as  long  as  possible, 
and  begin  to  be  presented  for  redemption,  the  bank  fails  without  a 
struggle. 

An  Indiana  bank  starting  with  an  actual  capital  of  $10,000,  workt 
up  in  the  manner  described  above  a circulation  of  $600,000.  Fifty-one 
of  the  ninety -four  free  banks  of  Indiana  suspended  before  the  panic  of 
’57  came.  In  Michigan  the  state  inspectors  discoverd  that  one  lot  of 
specie  was  traveling  before  them  and  serving  as  the  reservs  of  each 
bank  visited.  One  bank  had  $24,000  in  notes  out  and  no  record  of  it 
on  its  books;  the  bank  held  $100  in  specie.  Many  of  the  banks  were 
located,  “in  the  depths  of  trackless  forests  where  there  was  no  human 
inhabitant,  where  wild-cats  abounded.”  The  banks  came  to  be  cald 
wild-cat  banks.  Forty  of  the  free  banks  were  organized  when  the  law 
was  first  past  in  Michigan  and  all  but  two  faild  within  two  years. 
Things  were  hardly  better  in  Wisconsin.  We  read  of  bank  riots  in  Mil- 
waukee. In  Illinois  the  law  provided  that  the  notes  be  redeemd  in 


16 


The  Normal  School  Quarterly 


specie  at  the  banks’  counter,  yet  some  of  the  banks  did  not  have  any 
counters;  they  were  located  in  hired  rooms,  in  places  remote  from  rail- 
road stations,  and  situated  on  bottomless  prairie  roads.  (White’s  Money 
and  Banking).  Of  120  existing  at  onetime  in  the  state,  only  seven  were 
left  in  1861;  on  a circulation  of  twelv  millions,  the  loss  was  40  per  cent. 
Lists  of  banks  with  an  estimate  of  the  worth  of  their  notes  were  pub- 
lisht  in  the  newspapers,  subject  to  constant  change.  Merchants  posted 
such  lists  in  their  stores.  Everybody  had  to  be  on  the  lookout  for 
counterlits. 

States  as  The  Constitution  of  the  United  States  prohibited  the  states 
Bankers,  from  issuing  bills  of  credit.  The  Supreme  Court  has  decided, 
however,  not  only  that  a state  may  incorporate  banks  with  the  power  to 
emit  bank  bills  but  that  the  state  itself  may  have  an  interest  in  such 
banks,  the  banking  corporations  of  course  being  suable  in  the  courts. 
Several  states  tried  their  fortunes  as  bankers  during  the  period.  Some 
of  the  banks  in  question  were  entirely  ownd  and  controld  by  their 
states.  Thus,  in  the  early  years  of  the  century,  Vermont  ownd  a bank; 
and  the  state  was  obliged  to  levy  a land  tax  a few  years  later  to  redeem 
its  notes.  The  first  state  bank  in  Kentucky  was  partly  ownd  by  the 
state,  was  well  managed  and  only  brought  to  ruin  by  the  failure  of  a 
second  state  bank  whose  notes  it  had  been  forced  to  accept.  This  latter 
bank  was  entirely  ownd  by  the  state.  The  legislature  of  Kentucky 
tried  to  force  detors  to  take  its  depreciated  notes;  the  courts  of  the 
state  declared  the  attempt  unconstitutional;  then  a legislature,  elected 
on  the  issue,  attempted  to  do  away  with  the  old  Appellate  Court  and 
establish  a new  one.  This  action,  too,  the  old  court  declared  unconstitu- 
tional. The  matter  was  finally  settled  thru  an  election  in  which  the 
“Old  Court”  party  triumphed.  The  bank  was  later  deprived  of  its 
power  to  issue  notes,  which  by  this  time  nobody  wanted,  and  later  the 
state  reverted  with  better  fortune,  to  the  policy  of  part-ownership  in 
banks.  The  State  of  Alabama  set  aside  several  permanent  funds  and 
issued  about  $14,000,000  in  bonds  for  the  benefit  of  its  State  Bank. 
The  directors  had  practically  unlimited  power  to  issue  notes.  Direct 
taxation  was  abolisht  and  bank  money  set  aside  to  pay  the  ex- 
penses of  government.  When  the  affairs  of  the  bank  were  finally 
wound  up  in  1845  the  state  not  only  had  lost  the  permanent  funds  in- 
vested, but  was  saddled  with  a det  of  $4,000,000.  It  has  been  esti- 
mated that  the  people  of  Alabama  have  paid  in  taxes  ever  since  about 
$1,000  per  day  as  the  cost  of  the  experiment.  Illinois  after  some  experi- 
mentation as  part-owner  in  a few  banks,  became  sole  proprietor  of  one 


Out  Money  History 


17 


that  existed  during  the  decade  1821-1831.  This  bank  had  no  specie  capi- 
tal. The  capital,  so-cald,  was  the  $300,000  in  notes  that  the  bank  is- 
sued, and  that  were  loand  thruout  the  state  ‘ ‘to  anybody  that  could  get 
an  endorser.”  The  notes  quickly  went  far  below  par.  Some  of  them  that 
were  on  hand  were  orderd  by  the  legislature  to  be  burnd  in  the  public 
square  of  Vandalia  in  the  presence  of  the  Governor  and  the  Supreme 
Court  of  the  state.  In  the  end  the  state  borrowd  $100,000  and  redeemd 
the  notes  that  were  outstanding.  The  total  loss  to  Illinois  was  about 
$400,000.  Later  ventures  in  which  the  state  was  part-owner  also  turnd 
out  disastrously. 

A plan  tried  by  some  of  the  southern  states  was  to  issue  to  a bank, 
authorizedby  the  state,  bonds  for  the  redemption  of  which  the  credit  of 
the  state  was  pledged.  The  bank  proceded  to  market  the  bonds  and  to 
make  discounts  and  issue  bills  on  the  strength  of  the  procedes.  The 
state’s  benefit  was  to  come,  perhaps,  from  some  share  in  the  profits. 
Florida,  while  yet  a territory,  was  bonded  for  large  sums  to  set  up  a 
bank;  Louisiana  issued  $17,000,000  in  bonds  for  three  banks,  all  of  which 
faild;  Arkansas  after  two  experiments,  found  herself  with  a bonded 
det  of  $5,000,000;  Mississippi  likewise  issued^bonds,  which  bonds  she 
afterwards  repudiated  upon  the  plea  of  something  unconstitutional  in 
their  issue. 

In  a very  few  cases  the  records  of  the  state  banks  were  creditable. 
The  Bank  of  Indiana  was  a complete  success,  as  was  the  Bank  of  South 
Carolina.  Delaware  has  still  an  interest  in  a bank  that  has  existed 
for  nearly  a century.  It  of  course  issues  no  notes  now. 

The  Period  of  the  Civil  War 

The  Financial  U nder  the  operation  of  the  Tariff  of  1846  receipts  from 
Situation,  customs  had  become  large,  averaging  annually  during 
the  lastfive  years  $61,000,000;  during  the  same  period  receipts  from  the 
sales  of  public  lands  had  been  large;  each  of  the  eight  fiscal  years  end- 
ing with  that  of  1857  had  witnest  a substantial  excess  of  government 
receipts  over  expenditures.  The  situation  warranted  the  passage  of  the 
Tariff  of  1857,  with  its  reduced  rates  of  duties.  But  no  sooner  was  the 
Act  past  than  everything  seemd  to  go  wrong.  A period  of  financial 
depression  arrested  the  growth  of  importations,  and  this  with  the  drop 
of  seven  or  eight  per  cent  in  the  average  ad  valorem  rate  on  all  goods, 
resulted  in  a reduction  of  $15,000,000  per  annum  in  the  customs  receipts; 
and  the  receipts  from  the  sale  of  public  lands,  which  had  reacht  a max- 


18 


The  Normal  School  Quarterly 


imum  of  $11,500,000  in  1855,  fell  to  less  than  one  million  dollars  in  the 
fiscal  year  of  1861.  Meanwhile  government  expenses,  particularly  those 
for  public  bildings,  and  for  roads  and  canals,  had  increast.  The  net 
result  was  a deficit  of  about  $20,000,000  for  each  of  the  four  fiscal  years 
ending  with  1861.  Near  the  close  of  1857,  tresury  notes  were  author- 
ized; they  were  issued  at  par  at  reasonable  rates  of  interest,  varying 
from  three  to  six  per  cent.  A fifteen-year,  five  per  cent  loan,  negotia- 
ted the  next  year,  sold  at  an  average  premium  of  3.59.  Then  came  a 
change.  Another  loan,  of  $21,000,000,  at  5 per  cent  for  ten  years,  was 
authorized  in  June,  1860.  Ten  millions  of  this  was  advertized  in  Sep- 
tember; bids  were  receivd  for  the  amount  at  par  or  above,  but  after  the 
election  of  Lincoln  in  November,  as  it  became  evident  that  war  was  in- 
evitable, a commercial  crisis  ensued,  and  some  of  the  bidders  forfited 
their  deposits;  in  short,  it  was  found  impossible  to  float  much  more  than 
one-third  of  this  ten-year,  five  per  cent  loan  at  par  or  above,  as  the  law 
required,  and  the  remainder  of  the  loan  was  withdrawn  from  the  market. 
Nor  was  an  attempt  to  float  tresury  notes  much  more  successful.  An 
issue  to  the  amount  of  $10,000,000  was  authorized  in  December,  1860. 
Meanwhile,  Secretary  Cobb  had  gone  home  to  become  a little  later  vice- 
president  of  the  Confederacy.  His  successor,  Thomas,  invited  bids  for 
half  of  this  loan;  offers  for  only  $1,831,000  were  receivd  at  12  per  cent 
or  less;  these  offers  were  accepted.  Banks  of  New  York  were  finally 
persuaded  to  take  the  rest  of  the  $5,000,000  at  twelv  per  cent.  Fears 
were  entertaind  that  Secretary  Thomas  designd  putting  this  money 
where  it  would  be  captured  by  the  confederates,  and  the  payment  was 
not  completed  until  Dix  had  become  Secretary.  The  other  half  of  the 
loan  was  now  taken  at  an  average  interest  rate  of  lOf  per  cent.  A loan 
of  $25,000,000  was  authorized  in  February,  1861,  the  bonds  being  10-20’s 
and  bearing  6 per  cent  interest;  $8,000,000  of  this,  offerd  immediately, 
went  at  10  per  cent  discount.  The  Morrill  Tariff  Bill,  past  after 
many  Southern  senators  had  resignd,  went  into  effect  April  1,  when 
Lincoln  had  become  President  and  Chase  his  Secretary  of  the  Tresury. 
It  containd  a provision  for  a $10,000,000  loan  and  provided,  too,  that 
6 per  cent  tresury  notes,  receivable  for  dues  to  the  government,  re- 
deemable at  any  time  under  two  years,  and  exchangeable  for  6 percent 
bonds,  could  be  issued,  but  not  below  par,  in  place  of  any  bonds  alredy 
provided  for  and  not  sold.  A second  $8,000,000  of  the  $25,000,000  loan 
was  now  put  out  in  such  tresury  notes  and  in  bonds,  about  three-fifths 
being  in  the  latter  and  at  rates  that  ran  down  to  94.  The  remaining 
$9,000,000  of  the  loan  brought  the  tresury  about  $7,900,000,  most  of  the 


Our  Money  History 


19 


sum  being  for  bonds  at  85.  The  tresury  paid  out  about  $27,000,000, 
for  dues  or  for  cash,  in  tresury  notes  issued  under  the  Morrill  Act 
and  in  lieu  of  bonds  provided  for  in  June,  1860. 

Suspension  of  Congress  met  in  special  session  July  4,  1861. 
Specie  Payments.  Adopting  substantially  Chase’s  recommendations, 
it  sought  to  provide  for  the  anticipated  increase  in  ordinary  expenses 
for  the  coming  year  by  laying  revenue  duties  on  coffee  and  tea,  and  by 
raising  rates  on  sugar  and  molasses;  by  a direct  tax  of  $20,000,000  to 
be  apportiond  among  the  states;  and  by  an  income  tax  of  3 per  cent 
upon  incomes  over  $800.  The  extraordinary  or  the  war  expenses  for 
the  year,  it  was  proposed  to  meet  by  borrowing,  and  authority  was 
given  to  borrow  $250,000,000  on  twenty-year  bonds  and  tresury  notes; 
bonds  bearing  seven  per  cent  interest  to  be  issued  at  par  or  above, 
and  those  bearing  six  per  cent  not  to  be  sold  below  a price  that  would 
be  the  equivalent  of  par  for  seven  per  cent  bonds;  tresury  notes 
to  be  7.3  per  cent,  three-year  notes;  3.65  per  cent,  one  year  notes;  no- 
interest demand  notes,  amount  limited  to  $50,000,000  but  later  raised 
to  $60,000,000;  or  6 per  cent  notes  payable  at  any  time  within  twelv 
months. 

Banks  of  New  York,  Philadelphia,  and  Boston  undertook  to  take 
the  new  government  securities  to  the  amount  of  $150,000,000.  The 
business  depression  had  left  them  well-equipt  with  means.  The  first 
$50,000,000  was  taken  in  August  in  7.3  per  cent,  three- year  tresury 
notes.  The  government  opend  agencies  all  over  the  country  for  the 
sale  of  these  notes  on  account  for  the  banks,  but  sales  were  slow. 
October  1,  however,  a second  $50,000,000  was  arranged  for  in  the  same 
securities.  Sales  to  the  public  now  proved  so  slow  that  the  govern- 
ment agencies  were  abandond  and  the  banks  took  the  soliciting  of 
popular  subscription  into  their  own  hands.  A third  $50,000,000,  this 
time  in  6 per  cent,  20-year  bonds  at  89.32,  was  taken  the  middle  of 
November.  It  was  hoped  that  this  type  of  security  could  be  mark- 
eted in  Europe.  Until  early  in  December,  altho  the  banks  had  en- 
gaged to  loan  two  and  one-half  times  their  aggregate  holding  in  specie, 
things  had  done  well.  If  the  sale  of  securities  had  been  slow,  govern- 
ment disbursements  had  been  rapid  so  that  coin  found  its  way  from 
the  tresury  back  into  the  banks  in  the  course  of  a few  days.  The  de- 
mand notes  that  were  being  issued  by  the  government  were  an  annoy- 
ance to  the  banks,  tending  to  displace  bank  paper  and  requiring  sep- 
arate deposit  accounts  if  the  banks  did  not  wish  to  redeem  them  in 
coin.  Secretary  Chase  insisted,  too,  that  the  banks  pay  coin  in- 
to the  subtresuries  for  the  securities  purchast,  while  the  banks 
had  expected  simply  to  credit  the  government  with  the  amounts 


20 


The  Normal  School  Quarterly 


due  it  and  to  cash  its  checks  against  its  deposits  in  whatever  money 
the  drawees  might  be  willing  to  accept~a  procedure  that  Chase  claimd, 
possibly  wrongly,  would  not  have  been  warranted  by  law.  Early  in  De- 
cember the  report  of  Chase  to  Congress  showd  a very  discouraging  con- 
dition of  government  receipts  and  expenditures,  and  containd  no  com- 
prehensive plans  for  sufficient  taxation.  About  the  same  time  the 
Trent  Affair  seemd  to  make  a war  with  England  highly  probable.  The 
prices  of  government  securities  fell,  sales  of  securities  stopt,  depositors 
began  withdrawing  their  deposits  from  banks,  disbursements  made  by 
the  government  ceast  returning  to  the  banks,  other  banks  began  to 
draw  heavily  upon  their  New  York  correspondents.  New  York  banks 
lost  $13,000,000  in  specie  within  three  weeks;  while  the  holdings  in  coin 
of  the  New  York  banks  six  months  before  had  been  half  their  deposits, 
now  their  specie  holdings  were  reduced  suddenly  to  about  18  per  cent 
of  their  deposits.  The  New  York  banks  suspended  specie  payments 
December  30;  the  United  States  tresury  and  most  of  the  banks  of  the 
country  soon  followd  their  example. 

The  Issue  of  February  25,  1862,  President  Lincoln  signd  his 
Legal  Tender  name  to  a bill  that  has  been  calld  the  most  mo- 
Notes.  mentous  financial  step  ever  taken  by  Congress.  It 
authorized  the  issue  of  $150,000,000  in  United  States  notes,  $60,000,000 
of  which  were  to  be  used  in  retiring  the  demand  notes  of  the  previ- 
ous year.  The  new  notes,  speedily  known  as  greenbacks,  were  ex- 
changeable for  5-20  six  per  cent  bonds,  $500,000,000  of  which  were  auth- 
orized; five  per  cent  interest  was  to  be  paid  upon  limited  deposits  of 
greenbacks  at  the  tresury;  they  were  made  legal-tender  for  all  dets, 
public  and  private,  except  duties  on  imports  and  interest  on  the  pub- 
lic det;  The  bill  originated  in  a subcommittee  of  the  Ways  and  Means 
Committee  of  the  House  of  Representativs,  of  which  subcommittee 
Elbridge  Spaulding  of  New  York  was  chairman.  Only  after  many 
misgivings  did  Secretary  Chase  bring  himself  to  support  the  bill,  and 
only  after  bitter  opposition  and  a long  debate  was  the  bill  finally  past. 
The  opponents  of  the  mesure  assaild  it  upon  constitutional,  moral, 
economic,  and  fiscal  grounds.  Their  argument  ran  in  part  as  follow: 

The  proposed  notes  differd  from  any  that  had  ever  been  issued  in 
that  they  bore  no  interest,  were  payable  at  no  fixt  time,  and  were  a 
general  legal-tender.  Not  only  had  no  such  law  ever  been  past,  but  no 
such  law  had  ever  been  voted  on,  proposed,  introduced,  or  recommended 
by  any  department  of  government.  It  was  unconstitutional  in  that  it 
contemplated  a wholesale  violation  of  contracts.  It  said  to  the  creditor, 


Our  Money  History 


21 


“You  are  entitled  by  contract  to  receive  one  thing;  you  shall  take  anoth- 
er.” The  government  was  saying  to  a man,  “Here  is  my  note;  if  I do 
not  pay  it,  steal  the  amount  from  the  first  man  you  meet.”  Power 
to  pass  such  a law  would  surely  have  been  accorded  a place  among  the 
express  grants  of  the  Constitution— yet  no  one  could  put  his  finger  up- 
on any  such  grant.  But  the  power  was  said  to  be  incidental  to  a great 
variety  of  express  grants:  Congress  had  power  to  support  armies,  ergo, 
to  issue  legal  tenders;  it  had  power  to  borrow  money,  pay  the  dets  of 
the  United  States,  ergo , to  issue  legal-tender  notes;  it  had  power  to 
coin  money,  to  regulate  commerce,  ergo,  ergo,  etc.  All  this  was  the 
merest  subterfuge.  There  were  ways  clearly  constitutional  for  bor- 
rowing money,  paying  dets,  and  supporting  armies.  In  the  power 
given  Congress  to  regulate  commerce,  the  reference  was  only  to  inter- 
state commerce.  In  the  power  to  coin  money,  the  obvious  meaning 
was  metal  money.  Such  a law  would  subvert  the  Constitution,  and 
that  was  all  the  Southern  rebels  were  trying  to  do.  Economic  theory 
and  economic  history  alike  condemnd  irredeemable  paper.  It  was  as 
impossible  for  Congress  to  legislate  the  value  of  anything  up  as  it  was 
for  it  to  make  heroes  by  legislation;  Congress  could  legislate  a value 
down— it  could  do  that  by  trying  to  legislate  it  up.  All  history  taught 
the  miserable  folly  of  trying  by  legislation  to  change  lampblack  and 
rags  into  money.  Had  any  government  ever  stopt  with  a single  issue 
of  irredeemable  paper?  If  so,  when?  Hadn’t  a first  issue  always  be- 
gotten a second,  a second  a third,  and  so  on?  And  had  dire  penalties 
for  refusing  irredeemable  paper  ever  kept  its  value  up?  Did  the  aw- 
ful declaration  of  the  Continental  Congress  that  he  who  refused  paper 
was  an  enemy  of  his  country  keep  the  continental  currency  from  be- 
coming worthless?  Or  had  the  deth  penalty  saved  the  French  assig- 
nat? Had  Americans  ever  red  how  the  old  soldier  f Denmark  used 
to  light  their  pipes  with  irredeemable  paper?  How  Europe , in 
short,  had  had  similarly  bitter  experience?  The  history  of  the  partic- 
ular  notes  in  question  it  wasnot  hard  to  predict.  They  were  to  go  forth 
into  the  world  stampt  with  irredeemability,  with  the  mark  of  Cain, 
and  like  Cain  they  would  become  vagabonds  and  f ugitivs  on  the  earth. 
The  currency  would  be  expanded;  prices  would  be  inflated;  fixt  values 
would  depreciate;  incomes  would  be  diminisht;  the  savings  of  the 
poor  would  vanish;  the  hoardings  of  the  widow  would  melt  away; 
bonds,  mortgages,  and  notes,  everything  of  fixt  value,  would  lose 
their  value;  everything  of  changeable  value  would  appreciate;  the 
necessaries  of  life  would  rise  in  value;  silver  and  gold  would  disap- 
pear; the  government  would  have  to  pay  two-  or  threefold  for  every- 


22 


The  Normal  School  Quarterly 


thing  that  it  bought;  the  cost  of  the  war  would  be  multiplied.  Might 
not  the  government  as  well  sell  its  bonds  at  twenty-five  per  cent  dis- 
count as  to  pay  twenty-five  per  cent  more  for  all  that  it  bought?  But 
it  was  said  United  States  bonds  could  not  be  sold  for  more  than  sixty 
cents  on  the  dollar;  if  so,  we  could  stand  the  forty  per  cent  shave  to 
save  the  Constitution  to  ourselves  and  our  children.  Issue  these  notes 
and  the  day  of  reckoning  must  come;  private  ruin  and  public  bank- 
ruptcy, either  with  or  without  repudiation,  would  inevitably  follow. 
The  bill  was  a confession  of  bankruptcy,  an  exhibition  of  bad  faith,  an 
encouragement  to  bad  morals,  a stain  upon  national  honor.  There  was 
“no  precipis,  no  chasm,  no  yawning,  bottomless  gulf  before  the  Na- 
tion, so  terrible,  so  appalling,  so  ruinous  as  the  bill  before  Congress.” 

To  such  arguments  the  advocates  of  the  bill  made  answer:  If  the 
contemplated  mesure  was  unprecedented,  that  was  simply  because  the 
Nation  had  never  before  been  in  such  straits.  As  to  the  mesure’s  violat. 
ing  the  sanctity  of  contracts,  he  who  made  a contract  did  so  with  the 
Constitution  and  the  powers  of  Congress  before  him.  It  was  clearly 
the  spirit  of  the  Constitution  that  Congress  should  have  power  to  pro- 
vide a money  for  the  whole  country;  nowhere  was  gold  or  silver  men- 
tiond;  if  they  became  too  plentiful  or  too  scarce,  Congress  could  un- 
doutly  select  some  other  substance;  it  could,  thru  its  power  to  regulate 
the  value  of  coin,  put  as  little  as  it  pleased  of  metal  or  of  value  into 
coin;  it  had  been  the  practis  of  most  of  the  colonies  before  the  Revolution 
to  issue  legal-tender  bills  of  credit,  as  it  was  the  practis  of  most  soveren 
nations  of  the  time;  nowhere  did  the  Constitution  deny  to  Congress, 
the  power  to  issue  bills  of  credit  altho  the  right  was  denied  to  the 
states;  it  was  difficult  then  to  see  how  the  makers  of  the  Constitution 
could  have  intended  that  Congress  should  not  have  this  power.  Again, 
Congress  had  power  to  borrow  money;  then,  couldn’t  it  borrow  on  de- 
mand notes,  suited  to  circulate  from  hand  to  hand?  and  the  right  of 
Congress  to  issue  notes  having  long  been  conceded,  was  the  power  to 
give  them  the  usually  concomitant  legal-tender  quality  to  be  denied? 
Could  notes  that  no  man  need  take  be  as  valuable  as  those  that  all  men 
must  take?  A written  Constitution,  consisting  of  only  a few  pages  but 
intended  to  last  for  all  time,  left,  of  necessity,  much  to  implication;  had 
Congress  no  powers  but  its  exprest  powers,  the  government  could  not 
live  a week;  and  when  the  Constitution  empowerd  Congress  to  pass  all 
laws  necessary  and  proper  for  carrying  into  execution  exprest  powers, 
the  meaning  was,  as  the  Supreme  Court  had  held,  that  Congress  might 
employ,  not  simply  all  means  absolutely  and  indispensably  necessary, 


Our  Money  History 


23 


but  all  means  that  Congress  might  itself  judge  to  be  appropriate  and 
conduciv  to  the  end  to  be  accomplisht  provided  such  were  not  express- 
ly prohibited  to  Congress  in  the  Constitution.  It  followd  that  Congress, 
thru  its  power  to  raise  and  support  armies,  could  adopt  the  means  of 
doing  so  that  at  the  time  seemd  appropriate  and  feasible,  and  what  was 
the  issue  of  legal-tenders,  along  with  the  laying  of  taxes  and  the  selling 
of  bonds.  The  problem  of  the  time  was  not  whether  we  could  raise  men 
but  whether  we  could  raise  money.  The  very  existence  of  the  govern- 
ment dependent  upon  the  successful  administration  of  its  finances;  crip- 
pled and  balkt  here,  we  were  baffled  everywhere;  nobody  was  opposed 
to  the  mesure  on  constitutional  grounds  unless  he  was  at  hart  opposed 
on  other  grounds;  the  opposition  was  wearing  the  usual  mask  of  consti- 
tutional objections;  in  faceof  the  necessities  of  the  situation  the  question 
of  the  constitutionality  of  the  act  was  hardly  worth  considering  at  all; 
it  was  better  if  need  be  to  violate  a portion  of  the  Constitution  than  to 
allow  it  all  to  be  destroyd.  As  to  economic  theory  and  economic  histo- 
ry, their  teaching  was  not  that  irredeemable  paper  was  in  itself  bad 
but  that  over-issues  of  it  were  bad;  unless  the  supply  of  money  exceded 
the  demand,  it  couldn’t  depreciate;  the  continental  currency  had  not 
depreciated  until  issued  to  enormous  excess;  England  had  resisted 
Napoleon  twenty-five  years,  and  prosperd,  while  specie  payments  were 
suspended  and  Bank  of  England  notes  were  virtually  legal-tender;  ir- 
redeemable  paper  was  like  the  medicine  which  moderately  taken  was 
the  cure  for  many  ills,  but  taken  in  excess  became  itself  a poison. 
America  would  stop  short  of  over-issues  and  without  over-issues  there 
were  no  evils  necessarily  connected  with  legal-tender  notes.  Fiscally, 
what  other  course  was  possible?  Surely  not  much  dependence  at  such  a 
crisis  could  be  put  in  the  notes  of  suspended  state  banks.  If  the  pro- 
posed new  national  banking  system  could  not  be  organized  in  time,  if 
the  amounts  needed  could  not  be  realized  from  tariff  and  tax  bills  what 
then?  Was  the  government  to  go  shinning  thru  Wall  street  hunting 
money  at  ruinous  rates  of  discount,  like  an  individual  in  failing  cir- 
cumstances sure  to  be  used  up  at  last?  It  was  better  to  assert  the  power 
and  the  dignity  of  the  government,  issue  tresury  notes,  make  them 
legal-tender  for  all  dets,  public  and  private,  and  pledge  for  their  re- 
demption the  faith,  the  honor,  the  property  of  the  loyal  people  of  the 
whole  country. 

Within  three  or  four  months  after  the  first  issue  of  greenbacks  the 
tresury  found  itself  in  comfortable  condition;  but  as  it  was  clear  this 
condition  could  not  long  continue;  at  the  request  of  Mr.  Chase,  Congress 
authorized  another  issue  of  $150,000,000  in  July,  1862.  The  pay  of  the 


24 


The  Normal  School  Quarterly 


soldiers  having  fallen  into  arrears,  Congress,  contrary  this  time  to  the 
advice  of  Mr.  Chase,  authorized  another  issue  of  $100,000,000  the  fol- 
lowing January,  and  this  amount  was  increast  to  $150,000,000  in  March. 
In  June,  1864,  Congress  pledged  that  no  further  greenbacks  should  be 
authorized. 

The  Establish-  In  his  report  in  1861  Mr.  Chase  recommended  the 
ment  of  establishment  of  a system  of  national  banks.  The 
National  Banks,  matter  was  pusht  aside,  temporarily,  in  Congress  by 
mesures  that  promist  quicker  financial  returns.  In  his  report  of  1862 
Mr.  Chase  repeated  his  recommendation,  and  President  Lincoln  in  his 
message  of  the  same  year  supported  him.  The  proposition  had  aroused 
much  interest  thruout  the  country  and  Congress  now  turnd  in  earnest 
to  its  discussion.  A bill  introduced  in  the  Senate  by  John  Sherman 
past  that  body  without  a vote  to  spare,  past  the  House,  and  was  signd 
by  President  Lincoln  just  one  year  from  the  day  on  which  he  signd 
the  first  legal-tender  bill.  The  principal  arguments  for  the  mesure, 
made  mainly  by  Mr.  Sherman,  were  very  briefly,  as  follows:  The  cen- 
tral idea  of  the  bill  was  the  establishment  of  one  uniform  bank  cur- 
rency thruout  the  land,  a currency  supported  both  by  ample  private  cap- 
ital and  by  federal  bonds;  to  secure  to  the  government  absolute  con- 
trol over  paper  issues  and  yet  not  to  affect  injuriously  local  banks.  At 
the  prospect  of  war,  with  the  suspension  of  specie  payments,  when  coin 
had  disappeard  from  circulation,  the  government  had  found  itself  with- 
out any  legal  currency  in  which  to  transact  its  business,  for  the  law  for- 
bade the  receiving  of  state  bank  notes  at  the  tresury;  the  situation  had 
demanded  an  immediate  rather  than  a permanent  remedy  and  green- 
backs had  been  issued;  they  had  proved  of  great  service,  but  nobody  had 
regarded  their  issue  as  more  than  a temporary  expedient;  the  trouble 
with  the  greenback  was  that  it  was  not  convertible;  it  was  good,  but  no- 
body was  bound  to  redeem  it;  it  had  alredy  depreciated,  and  the  proposi- 
tion, coming  from  the  House  of  Representatives,  to  issue  $300,000,000 
more  in  greenbacks  had  raised  the  price  of  gold  30  per  cent  within  three 
or  four  weeks;  clearly  no  further  greenbacks  could  be  issued;  and  after 
the  war  was  over  the  greenbacks  should  and  would  disappear,  being 
exchangeable  as  they  were  for  bonds;  but  the  need  for  paper 
money  would  continue;  history  had  demonstrated  that  public 
faith  alone  could  not  sustain  paper  issues;  in  searching  for  a 
proper  and  permanent  paper  currency,  it  was  necessary  to  look 
for  one  founded  upon  both  individual  and  national  support.  The 
paper  of  state  banks  was  no  more  acceptable  as  a permanent 
currency  than  was  the  greenback;  in  the  time  of  war  private 


Our  Money  History 


25 


paper  became  the  enemy  of  government  issues;  with  the  supension 
of  specie  payments  the  power  of  local  banks  to  issue  paper  became 
equivalent  to  the  power  to  coin  money;  the  banks,  relievd  from  the 
necessity  of  keeping  coin  reservs,  were  increasing  their  issues  with 
every  issue  of  greenbacks:  that  it  was  that  was  leading  to  inflation;  nor 
would  a state  bank  currency  authorized  by  varying  laws  of  two  or  three 
dozen  states  do  even  in  the  time  of  peace;  there  were  in  existence  state 
banks  with  branches,  and  state  banks  without  branches,  independent 
banks,  free  banks,  private  banks,  charterd  banks  of  endless  variety, 
and  banks  organized  under  numerous  and  different  general  laws;  in  some 
states  there  was  supervisions,  and  reports,  and  examinations,  but  in 
other  states  there  was  nothing  of  all  this  that  was  at  all  worthy  of  the 
name;  circulation  was  based  upon  an  endless  variety  of  securities;  less 
than  one-fourth  of  the  circulation  of  the  country  was  based  on  bonds 
of  states;  the  people  were  suffering  continual  loss  thru  such  a system, 
and  when  hard  times  came  their  losses  would  be  multiplied;  there 
were  1,500  banks  in  existence  with  7,000  varieties  of  genuin 
notes,  1,861  kinds  of  imitations,  3,039  kinds  of  alterations,  and  1,685  va- 
rieties of  spurious  notes;  now  it  was  proposed  to  establish,  a system 
whereby  all  this  state  bank  money  easily  and  without  injury  to  anybody, 
should  be  absorbed;  the  proposition  was  to  substitute  for  this  hetero- 
geneous paper  of  1,500  state  banks,  one  uniform  paper,  secured  by  are- 
serv  of  twenty-five  percent  on  deposits  and  circulation,  by  the  liability 
of  stockholders  to  twice  the  value  of  their  stock,  by  first  lien  on  all  the 
bank  assets,  and  by  government  bonds.  Y arious  other  reasons  would  sug- 
gest themselvs  for  the  passage  of  the  bill;  the  new  banks  would  be 
obliged  to  buy  government  bonds  upon  which  to  base  their  circula- 
tion, and  thus  would  be  afforded  a moie  favorable  market  for  the 
bonds  than  was  to  be  secured  in  any  other  way;  this  new  market  for 
the  bond  would  raise  its  worth  everywhere;  taxes  could  be  paid  in 
national  bank  notes,  and  the  people  thus  would  be  obliged  no  longer 
to  buy,  with  state  bank  notes,  greenbacks  for  the  purpose;  national 
banks  would  become  depositories  for  government  money,  the  deposits 
being  secured  by  bonds;  the  issue  of  notes  would  be  limited  to  $300, 
000,000,  an  amount  that  would  not  mean  inflation  for  the  state  bank 
paper  would  gradually  disappear;  the  bill  would  bring  benefit  to  the 
state  banks  themselvs  and  secure  to  their  new  notes  wider  circulation; 
it  would  gard  them  as  well  as  the  people  against  fraud;  it  would  foster 
the  spirit  of  nationality;  indeed,  we  could  not  preserv  our  nationality 
without  a national  system  of  finance,  the  defeat  of  the  bill  ment  the  ac- 
ceptance of  the  proposition  to  issue  $300,000,000  in  greenbacks  with  all 


26 


The  Normal  School  Quarterly 


the  evils  necessarily  involvd;  it  was  easy  to  find  objections  to  the 
mesure,  but  could  somebody  suggest  something  better? 

Provisions  of  The  act  of  1863  was  largely  recast  in  1864;  many 
the  National  changes, too,  have  been  made  in  it  since  then.  It 
Banking  Law.1  will  be  best  to  outline  the  law  as  it  is  now  (1910). 
The  banks  are  in  charge  of  the  Controller  of  the  Currency,  who  may 
give  to  any  five  persons,  if  he  sees  fit,  a bank  charter,  good  for  20  years 
and  renewable  for  20  more.  Banks  in  places  of  less  than  3,000  popula- 
tion need  have  only  $25,000  capital;  in  places  between  3,000  and  6.000 
they  must  have  a capital  of  at  least  $50,000,  etc.  Half  of  a bank’s  capi- 
tal must  be  paid  in  before  it  starts,  and  the  rest  must  come  in  10  per 
cent  a month  thereafter.  Shareholders  are  liable  for  their  stock  and 
to  an  equal  amount  in  their  private  property.  The  banks  have  all  the 
ordinary  banking  powers,  including  that  of  issuing  notes.  In  general 
they  cannot  hold  real  estate,  nor  can  they  loan  on  realty.  A bank 
with  a capital  of  $150,000  or  less  must  buy  United  States  bonds  to  a 
face  value  of  one-fourth  of  its  capital;  larger  banks  buy  $50,000  in 
bonds.  If  these  bonds  are  deposited  at  the  United  States  tresury, 
the  bank  receives  blank  bank  notes  to  the  amount  of  their  face  value; 
these  it  may  sign  and  circulate.  They  are  receivable  for  all  dues  to 
the  United  States  excepting  customs  and  payable  for  all  federal  dets 
except  interest  on  the  public  det.  Every  bank  must  redeem  in  lawful 
money  its  own  notes  on  demand,  and  it  must  take  in  its  transactions 
the  notes  of  other  banks.  A deposit  of  five  per  cent  of  its  circulation 
must  be  kept  by  a bank  with  the  United  States  tresury  for  the  re- 
demption of  any  notes  presented  them  for  redemption.  Circulation 
based  on  two  per  cent  bonds  is  taxt  one-half  of  one  per  cent  annual- 
ly; if  based  on  other  bonds,  twice  that  amount.  Local  taxes  can  be 
laid  upon  bank  shares  only.  Banks  giving  satisfactory  security  may 
be  made  depositories  of  public  money.  Any  city  of  50,000  population 
may  be  made  a reserv  city  upon  petition  of  three-fourths  of  the  na- 
tional banks  in  it;  similarly  a city  of  200,000  or  over  may  become 
a central  reserv  city.  Reserv  and  central  reserv  cities  must  keep  in 
reserv  in  lawful  money  an  amount  equal  to  25  per  cent  of  their  de- 
posits; other  cities  must  keep  15  per  cent  reserv;  but  half  the  reserv 
of  a resery  city  may  be  kept  on  deposit  with  an  approvd  bank  of  a 
central  reserv  city;  and  three-fifths  of  the  reserv  of  a smaller  bank 
may  be  deposited  with  a reserv  city  bank.  Its  five  percent  deposit  at 
Washington  may  be  counted  as  part  of  a bank’s  reserv.  A bank  must 
put  aside  ten  per  cent  of  its  net  profit  each  year  until  it  has  a surplus 
fund  that  is  one-fifth  of  its  capital.  Five  regular  reports  are  made  to 


1 For  the  Emergency  Currency  Act  of  1908,  see  page  38. 


Our  Money  History 


27 


the  Controller  each  year,  statements  must  be  publisht,  and  the  books 
open  to  the  inspection  of  examiners.  At  the  order  of  the  Controller 
at  any  time  a bank  must  wind  up  its  affairs. 


Summary  of  Nearly  a quarter  of  a billion  dollars  in  gold  was  in 

Currencies  circulation  in  the  loyal  states  at  the  approach  of  the 

During  the  war;  after  the  suspension  of'specie  payments  all  of 
War.  this  speedily  disappeard  with  the  exception  of  twenty 

to  twenty-five  millions  which  remaind  in  circulation  on  the  Pacific 
slope,  where  public  opinion  successfully  fought  the  introduction  of  the 
greenback.  The  forty  or  more  millions  in  subsidiary  silver,  the 
coins  having  been  debased  in  1853,  did  not  vanish  so  quickly;  as  the 
premium  on  gold  continued  to  rise,  however,  it  soon  became  profitable 
to  ship  such  silver  bo  Canada  or  Europe,  and  it  was  all  exported  or 
hoarded  excepting  about  three  millions  that  remaind  in  circulation 
in  California.  The  big  copper  cent  and  half-cent  of  1792  had  been  re- 
placed in  1857  by  a smaller  cent  of  72  grains,  12  per  cent  being  in 
nickle,  which  was  thus  the  only  minor  coin.  The  demand  for  this 
became  so  great  after  the  disappearance  of  subsidiary  silver  that  it 
went  to  a premium ; eventually,  too,  as  greenbacks  went  lower  and  lower 
it  became  intrinsically  more  valuable  than  they,  and  was  hoarded  or 
melted  up  for  the  nickle  in  it.  It  was  replaced  by  our  bronze  cent  48 
grains,  95  per  cent  copper,  5 per  cent  tin  and  zinc,  in  1864.  A two- 
cent  piece  of  like  composition  was  authorized  at  the  same  time  (dis- 
continued in  1890).  A three-cent  nickel  piece  was  authorized  in  1865 
(discontinued  in  1890).  Our  flve-cent  nickel,  three-fourths  copper  and 
one-fourth  nickel,  came  in  1866.  It  and  the  bronze  cent  are  now 
legal-tender  up  to  twenty-five  cents.  The  small  change  famin  during 
the  war  led  to  many  devices:  dollar  bills  were  cut  into  halvs  or 
quarters;  private  parties,  firms,  corporations,  contrary  to  law,  issued 
tickets,  tokens,  checks,  “shinplasters,”  for  circulation;  banks  and 
municipalities  issued  small  notes;  postage  stamps  came  to  be 
used,  and  their  use  was  authorized  by  law  in  July,  1862;  fractional 
paper  currency  was  authorized  to  replace  the  postage  currency  in 
March,  1863,  both  being  redeemable  in  greenbanks.  The  old  demand 
notes  to  the  amount  of  fifty  or  sixty  millions  were  in  circulation  only 
a short  time.  The  greenback  circulation  eventually,  as  we  have  seen, 
reacht  $450,000,000.  The  state  banks  after  the  suspension  of  specie 
payments  and  the  issue  of  greenbacks  had  expanded  their  circulation 
to  nearly  a quarter  of  a million,  but  after  the  national  banking  law 
was  past  their  notes  were  driven  out  of  circulation  by  federal  taxation, 
the  rate  finally  reaching  10  per  cent.  National  bank  notes  came  into 


28 


The  Normal  School  Quarterly 


circulation  exbensivly  during  the  last  year  of  the  war.  Interest-bear- 
ing legal-tender  tresury  notes  of  three  varieties  were  issued  in  large 
amounts  in  the  closing  years  of  the  war;  they  enterd  into  circulation 
somewhat  and  were  held  by  banks  extensivly  for  reservs.  Certifi- 
cates of  indetedness  and  7-30  tresury  notes  of  1864  and  1865,  tho  not 
legal-tender,  were  used  to  some  extent  as  currency. 

Effects  of  The  relativ  values  of  gold  and  greenbacks  changed  con- 
JLegal  Ten-  stantly  during  the  war.  In  February,  1863,  a greenback 
der  Issues,  dollar  went  as  low  as  58  cents  in  gold;  in  August  its  low- 
est value  was  77  cents;  In  July,  1864,  the  lowest  was  35  cents;  1865 
closed  with  greenbacks  at  67  cents.  The  gold  had  disappeard  from  cir- 
culation; it  was  in  demand  for  customs,  foren  remittances,  for  hoard- 
ing, and  for  speculativ  purposes.  A feverish  trade  in  it  sprang  up,  as  at 
the  “gold  room”  in  Ne  w York.  It  was  a question  with  the  public 
whether  people  gambled  in  gold  because  it  fluctuated  or  whether  it 
fluctuated  because  of  gambling  in  it.  At  one  time  such  speculation 
in  gold  was  forbidden  by  law;  that  made  gold  harder  to  find,  the  pre- 
mium on  it  went  higher,  and  the  law  was  hastily  repeald.  All  this 
time  gold,  a world  commodity,  was  not  fluctuating  violently  abroad; 
and,  in  general,  prices  of  commodities  in  it  here  were  not  changing 
extravagantly;  and,  that  it  was  exported  in  large  quantities  thruout 
the  war,  seemed  to  indicate  that  it  was  no  more  valuable  here  than 
abroad.  Especial  demands  for  gold  at  particular  times,  manipula- 
tions of  speculators,  corners  in  the  market,  etc.,  unquestionably  had 
their  temporary  effects,  but  the  main  difficulty  seems  to  have  been 
with  the  greenback.  Legal-tender  provisions  could  affect  only  exist- 
ing obligations;  sellers  could  still  make  a difference  between  gold  and 
greenback  prices  for  their  goods;  that  greenbacks  were  receivable  for 
excises  could  not  be  expected  to  hold  up  the  value  of  such  extensiv 
issues;  that  the  greenback  was  exchangeable  for  bonds  helpt  little, 
for  the  bond  too  depreciated  and  fluctuated.  The  greenback,  the  nation- 
al bank  note,  and  to  a lesser  degree  the  bond,  rose  or  fell  in  value  in 
response  to  union  victories  or  defeats,  political  changes,  favorable  or 
unfavorable  tresury  reports,  propitious  or  unpropitious  foren  rela- 
tions, successful  or  unsuccessful  attempts  to  tax  or  to  borrow,— in 
short,  in  response  to  everything  that  affected  or  was  thought  to  affect 
the  possibility  of  their  being  paid. 

The  rise  in  currency  prices  of  commodities  during  the  war  followd 
quite  closely  the  rise  in  the  premium  on  gold.  By  November,  1863, 
prices  in  general  had  risen  50  per  cent;  by  July,  1864,  100  per  cent;  by 
January,  1865,  227  per  cent.  Undoutedly  extended  purchases  by  the 


Our  Money  History 


29 


government  raised  the  prices  somewhat  of  certain  commodities,  but 
this  was  probably  balanced  by  the  tendency  of  a lessened  demand  for 
certain  commodities  to  bring  down  their  prices;  certain  Southern  pro- 
ducts, such  as  cotton,  tar,  turpentine,  went  up  remarkably,  but  the  les- 
send  demand  from  the  South  for  products  of  the  North  must  have 
counterbalanced  this;  customs  duties  operated  to  raise  some  prices,  so 
too  excises,  so  far  as  they  could  be  shifted  to  the  consumer;  the  with- 
drawal of  so  many  men  from  the  ranks  of  laborers  made  laborers  scarce 
and  wages  high,  and  high  wages  ment  increast  cost  of  producing  goods 
and  increast  prices,  but  wages  followd  rather  than  preceded  prices  in 
their  rise;  and  gold  prices  thruout  the  world  were  rising  slightly,  due 
to  an  increast  production  of  gold;  yet,  the  main  cause  of  the  general 
rise  in  prices  during  the  war  was  unquestionably  the  depreciation  of 
the  greenback.  The  lines  that  represent  currency  prices  and  the  pre- 
mium on  gold  are  so  concomitant  in  their  variations  thruout  the 
years  of  the  war  that  this  conclusion  is  irresistible.  Money  wages  also 
rose  during  the  war,  but  not  so  rapidly  nor  so  extensivly  as  prices;  so 
real  wages  declined.  With  all  this  went  the  defrauding  of  creditors, 
the  hampering  of  legitimate  business  operations,  the  encouraging  of 
speculativ  ventures. 

Greenback  issues  furnisht  over  one-fifth  of  the  total  tresury  re- 
ceipts for  the  fiscal  year  of  1862;  over  two-fifths  of  the  receipts  the  next 
year;  less  than  five  per  cent  of  the  receipts  for  1864;  thereafter  the  re- 
demption was  greater  than  the  issues.  As  the  war  progrest  greater 
dependence  was  placed  upon  internal  revenues,  sales  of  bonds  and  short- 
time  interest  notes.  Customs  afforded  thruout  the  war  about  one- 
tenth  of  the  tresury  r eceipts.  Thus,  legal-tender  issues  were  an  impor- 
tant source  of  revenue  during  two  years.  As  to  the  effect  of  green 
back  issues  upon  the  cost  of  the  war,  there  is  the  greatest  divergence 
of  opinion.  An  estimate  may  be  made  by  computing  the  increast  num- 
ber of  dollars  that  had  to  be  borrowd  in  paper  to  be  repaid  eventually 
in  gold,  or  by  computing  the  decline  in  the  specie  value  of  the  paper 
money  raised  by  the  sale  of  bonds.  Several  writers  have  concluded 
that  the  war  cost  eight  or  nine  hundred  million  dollars  more  than  it 
would  have  cost  had  no  greenbacks  been  issued.  The  most  elaborate 
study  ever  made  of  the  whole  question  (Mitchell’s  History  oj  the  Gh'een- 
hacks ) puts  the  figure  at  $589,000,000.  Still  other  writers  do  not  be- 
lieve that  the  greenbacks  increast  the  cost  of  the  war  at  all.  As  it  was, 
they  say  the  government  had  to  obligate  itself  to  about  twice  the 


30 


The  Normal  School  Quarterly 


gold  value  of  the  goods  and  servises  purchasb,  because  prices  and  wages 
in  greenbacks  were  roughly  twice  the  usual  rates,  the  bonds  selling  in 
greenbacks  at  par;  had  there  been  no  issue  of  legal-tenders  the  govern- 
ment would  still  have  been  obliged  to  obligate  itself  to  twice  the  gold 
value  of  the  goods  and  servises  bought,  because  it  would  have  realized 
in  gold  only  half  the  face  value  of  its  bonds,  which  it  is  safe  to  assume 
would  have  fallen  in  gold  value  just  as  they  did  fall,  greenbacks  or  no 
greenbacks.  The  trouble  was  not  with  the  greenbacks  but  in  the  low 
value  set  upon  government  securities  of  whatever  sort.  The  green- 
back it  was,  they  say,  that  saved  the  Union. 


Since  the  Close  of  the  Civil  War 

Greenbacks  Should  United  States  bonds  be  paid  in  gold  or  in 
or  Gold  for  the  greenbacks;  for  example,  the  five-twenties  of  1862, — 
Bondholders?  there  being  nothing  on  the  face  of  the  bond  nor  in 
the  act  that  authorized  it  calling  explicitly  for  coin?  On  the  one 
hand  it  was  argued,  that  the  legal-tender  provision  on  the  greenback 
made  it  good  for  the  det;  that  the  bond  had  been  bought  with  depre- 
ciated paper;  the  money  the  capitalist  had  paid  for  the  bond  was  the 
one  he  should  get  back;  what  had  been  good  enough  for  the  soldier 
was  good  enough  for  the  bondholder,  who  from  the  interest  paid  in 
gold  at  a premium  had  alredy  reapt  an  enormous  gain;  capital  should 
have  been  drafted  into  the  service  of  its  country  just  as  men  had  been. 
On  the  other  hand  it  was  claimd  the  capitalists  had  staked  his  prin- 
cipal on  the  successful  issue  of  a doubtful  struggle,  had  won,  and  was 
entitled  to  the  gain;  to  pay  bonds  with  greenbacks  would  be  to  pay  off 
one  det  with  another;  it  would  be  a breach  of  faith  and  an  indelible 
stain  on  the  Nation’s  honor.  The  Republican  platform  of  1868  de- 
nounced and  the  Democratic  favored  payment  in  greenbacks;  and 
Johnson  in  his  annual  message  of  the  same  year  suggested  that  the 
bondholders  should  be  content  to  let  future  interest  payments  go  to- 
ward extinguishing  the  principal  of  their  bonds,— a proposition  that 
the  Senate,  by  resolution,  roundly  condemned.  Grant,  in  his  first  in- 
augural address,  declared  that  every  dollar  of  the  public  det  must  be 
paid  in  gold,  unless  it  was  otherwise  expressly  stipulated  in  the  con- 
tract; and  Congress,  cald  in  extra  session,  pledged  the  payment  of 
bonds  and  notes  in  coin  or  its  equivalent.  The  pledge  has  been  kept. 


Our  Money  History 


31 


Problems  Within  a few  years  after  the  close  of  the  war,  cer- 

of  Resumption,  tificates  of  indetedness,  interest-bearing  legal-ten- 
ders, and  tresury  notes  of  1864  and  1865,  all  of  which  had  to  some  ex- 
tent servd  as  currency,  vanish  t — funded,  for  the  greater  part,  into  long- 
time bonds.  The  first  issues  of  greenbacks  were  exchangeable  for 
bonds;  but  as  their  holders  seldom  seemd  to  care  to  make  the  exchange 
the  privilege  was  soon  taken  away  from  them,  and  later  issues  were 
not  made  convertable.  So  after  the  war  the  legal-tenders  did  not  dis- 
appear, automatically,  thru  conversion,  as  it  had  once  been  predicted 
they  would;  they  and  national  bank  notes  remaind  the  media  of  ex- 
change, and  how  to  get  back  to  a specie  basis  became  the  great  finan- 
cial problem  for  more  than  a decade.  Each  of  half  a dozen  plans  as 
to  resumption  found  its  supporters:  (1)  the  greenbacks  should  be  re- 
deemd  immediately,  but  at  some  fixed  rate  of  discount;  (2)  a certain 
amount  in  the  notes  should  be  burnd  each  month  until  the  diminish- 
ing supply  made  their  value  equal  to  that  of  gold;  (3)  the  “way  to  re- 
sume was  to  resume”-let  the  government  and  the  banks  but  announce 
the  purpose  and  the  patriotism  of  the  people  would  do  the  rest;  (4) 
the  government  should  set  about  the  accumulation  of  an  ample  gold 
reserv  and  announce  its  purpose  of  resuming  specie  payments  at  some 
future  date;  (5)  there  should  be  no  contraction,  but  the  policy  should 
be  one  of  waiting  until  thru  increast  population  and  increast  business 
the  country  “grew  up  to  the  needs”  of  the  money  that  it  had  and  its 
value  rose  to  that  of  gold;  (6)  there  should  be  no  thought  of  a return 
to  a specie  basis,  greenbacks  should  remain  the  money  of  the  country, 
their  circulation  should  be  increast,  and  all  bank  notes  should  be  retired. 

The  course  actually  followd  was  a wavering  one.  The  amount  of 
greenbacks  authorized  during  the  war  was  $450,000,000,  but  in  1864 
Congress  had  orderd  that  the  amount  in  circulation  should  never  ex- 
cede  $400,000,000,  the  other  $50,000,000  being  used  as  a reserv  for  tem- 
porary loan  certificates;  in  1866  it  was  provided  that  $10,000,000  be  re- 
tired immediately,  and  an  amount  thereafter,  not  to  excede  $4,000,000 
a month;  in  1868,  when  the  amount  in  circulation  stood  at  $356,000,000, 
in  response  to  the  cry  against  “contraction”  further  retirement  was 
forbidden;  to  ease  the  money  market  during  the  crisis  of  1873  the  tres- 
ury bought  bonds  with  $26,000,000,  of  the  $44,000,000,  that  had  been  re- 
tired—an  expedient  of  questiond  legality;  in  1874  Grant  vetoed  a bill 
to  increase  the  greenback  circulation  by  $40,000,000;  in  1875  it  was  pro- 
vided that  retirement  might  go  on  until  the  amount  in  circulation  was 


32 


The  Normal  ISchool  Quarterly 


reduced  to  $300,000,000,  but  there  was  no  explicit  provision  as  to  wheth- 
er retired  notes  might  be  reissued;  in  1878  an  act  was  past  suspending 
all  cancellation  of  redeemd  notes  and  directing  their  reissue,— so  the 
amount  in  circulation  now  stands  where  it  was  then,  at  nearly  $347,- 
000,000.  Congress  finally  declared  in  1875  that  specie  payments  should 
be  resumed  January  1,  1879,  and  provided  for  the  accumulation  of  a 
gold  reserv  thru  the  sale  of  bonds.  When  the  date  set  came  a reserv 
of  $138,000,000  was  on  hand,  and  resumption  was  accomplisht  without 
difficulty.  Few  presented  greenbacks  for  redemption.  As  soon  as  peo- 
ple knew  they  could  have  gold  for  the  asking,  they  preferd  their  pa- 
per to  gold.  Meanwhile  the  question  of  the  constitutionality  of  the 
greenback  was  being  fought  out  in  the  courts.  In  1871  it  was  decided  by 
the  Supreme  Court,  reversing  a decision  renderd  by  Chief-Justice 
Chase  two  years  before,  that  war  issues  were  constitutional,  the  power 
being  incidental  to  that  of  raising  and  supporting  armies;  in  1884  issues 
in  the  time  of  peace  were  declared  constitutional  under  the  powers 
Congress  had  to  issue  bills  of  credit,  coin  and  borrow  money. 

The  The  Greenback  party  was  an  organized  opposition  to 

Greenback  plans  for  resumption.  In  its  platform  in  1876  it  stood  f o r 
Party.  the  withdrawal  of  all  bank  notes;  the  payment  of 
government  bonds,  whenever  possible,  in  greenbacks,  and  a currency  of 
greenbacks  alone,  the  notes  to  be  exchangeable  on  demand  for  a 3.65  per 
cent  United  States  bond,  and  to  be  legal-tender  for  all  dets,  public  and 
private.  It  was  argued  that  such  a currency  would  be  self-regulativ  as 
to  amount;  if  there  became  too  much  of  it,  it  would  be  converted  into 
bonds;  if  too  little,  such  bonds  would  be  exchanged  for  it;  it  was  not 
necessary  to  use  costly  substances  for  media  of  exchange,  which,  more- 
over depended  for  their  value  upon  the  chances  of  production;  the  sup- 
ply of  paper  money  could  be  regulated  and  its  value  thus  controld,— for 
its  value  like  that  of  everything  else  depended  upon  demand  and  sup- 
ply, that  is,  upon  the  amount  of  money-work  or  exchanging  to  be  done 
and  the  amount  of  money  in  circulation;  and  if  anybody  was  to  have 
the  privilege  of  borrowing  without  interest  from  the  people,  it  should 
be  the  government  rather  than  the  banks;  the  Nation  was  loaning  its 
credit  to  the  bankers  that  they  might  getint  erest  twice  on  their  money. 

Most  of  the  replies  to  the  greenback  argument  were  as  extreme  as 
was  that  argument  itself,  but  these  two  were  rational:  (1)  when  a people 
become  distrustful  of  a money  and,  by  a resort  to  barter  or  otherwise, 
avoid  taking  it  in  exchange,  the  demand  for  it  is  thereby  diminisht 


Our  Money  History 


33 


and  its  value  reduced;  (2)  nearly  all  history  proves  that  legislativ 
bodies  can  not  be  trusted  to  refrain  from  over-issues  of  irredeemable 
paper. 

The  Silver  The  ratio  of  about  16:1,  establisht  by  the  acts  of 

Controversy.  1834  and  1837,  undervalue  silver:  3711  grains  of  silver 
were  worth  more  as  bullion  than  coind,  and  the  coinage  of  the  sil- 
ver dollar  soon  practically  ceast;  the  coinage  of  the  subsidiary  silver 
pieces  continued  after  1853  from  bullion  purchast  by  the  government, 
but  the  coins  were  debased  and  legal-tender  to  only  $5.00.  In  1873, 
when  gold  too  had  disappeard  from  circulation  and  the  country  was 
on  a paper  basis,  an  act  was  past  that  dropt  the  standard  silver  dollar 
from  the  list  of  coins,  but  substituted  a trade  dollar  of  420  grains, 
standard  fineness.  In  1876  the  legal-tender  quality  of  the  trade  dollar 
was  taken  from  it  and  its  coinage  limited  to  the  demands  for  it  in  the 
export  trade-in  1878  its  coinage  was  discontinued.  Other  silver  coins 
were  still  legal-tender  to  $5.00.  Thus,  these  acts  stopt  the  free  coin- 
age of  silver  altogether.  Meanwhile  silver  as  a primary  money  metal 
had  been  discarded  by  Germany,  the  Latin  Union  had  stopt  its  free 
coinage,  silver  production  was  increasing  rapidly,  and  silver,  as  com- 
pared with  gold  at  least,  was  falling  in  value.  Now  at  last,  the  full 
importance,  for  weal  or  for  woe,  of  the  act  of  1873  was  generally  real- 
ized: either  silver  was  falling  because  of  its  demonetization  here  and 
abroad;  or,  if  its  increast  production  would  have  caused  the  fall  any- 
way, it  would,  had  it  not  been  demonetized,  have  come  back  into  cir- 
culation. A determind  movement  set  in  for  the  free  and  unlimited 
coinage  of  the  silver  dollar.  The  first  fruit  of  the  agitation  was  the 
passage  of  a compromise  mesure,the  Bland-Allison  Act  of  1878.  This 
provided  for  the  purchase  at  the  market  price  of  from  two  to  four 
million  dollars’  worth  of  silver  bullion  per  month  and  the  coinage  of 
the  same  into  the  old  standard,  legal-tender  dollar;  for  deposits  of 
these  dollars  the  tresury  issued  silver  certificates,  which  were  not 
legal-tender,  but  were  redeemable  in  silver  on  demand.  Under  this 
act  more  than  378,000,000  dollars  were  coind,  most  of  which  were 
heapt  up  in  the  tresury,  silver  certificates  circulating  in  their  sted. 
The  Bland-Allison  Act  retarded  for  five  or  six  years  the  fall  of  the 
price  of  silver  in  gold.  The  agitation  for  unlimited  free  coinage  con- 
tinued and  resulted  in  the  passage  of  another  compromise  bill — the 
Sherman  Act  of  1890.  This  act  provided  for  larger  puchases  of  silver 
—4,500.000  ounces  per  month— to  be  paid  for  with  tresury  notes,  pay- 
able in  coin  on  demand,  and  legal-tender  for  all  dets  excepting 
when  expressly  stipulated  to  the  contrary  in  the  contract;  so 


34 


The  Normal  School  Quarterly 


much  of  the  silver  was  to  be  coind  as  was  necessary  to  redeem  notes 
presented  *for  redemption.  Under  this  act  tresury  notes  to  the  a- 
mount  of  nearly  $156,000,000  were  put  into  circulation;  like  the  green- 
back, when  they  came  back  into  the  tresury  they  was  reissued.  The 
price  of  silver  jumpt  momentarily  nearly  to  the  hight  of  1878  but 
soon  fell  again  and  lower  this  time  than  ever  before. 

The  Run  on  In  planning  for  resumption  a minimum  gold  reserv 
the  Tresury  of  $100,000,000  had  been  suggested  by  Secretary  Sher- 
for  Gold.  man;  when  the  cancellation  of  greenbacks  was  stopt  in 
1878,  the  gold  on  hand  was  about  $103,000,000;  in  1882,  in  providing  for 
the  issue  of  gold  certificates  against  deposits  of  gold,  Congress  had 
directed  that  their  issue  be  suspended  whenever  the  gold  reserv  in 
the  tresury  fell  below  $100,000,000.  Thus,  a gold  reserv  of  $100,000,- 
000  came  to  be  regarded,  sentimentally  perhaps,  by  the  people  as  set- 
ting a limit,  above  which  lay  safety,  and  below  which  lay  danger. 
The  redemptions  of  greenbacks  in  gold  from  the  time  of  the  resump- 
tion of  specie  payments  down  to  the  passage  of  the  Sherman  Act 
were  insignificant,  the  reserv  was  easily  held  above  $100,000,000,  and 
at  times  amounted  to  about  twice  that,  being  over  $190,000,000  at  the 
close  of  the  fiscal  year  1890.  From  1880  down  thru  1890  there  had 
been  annually  a large  excess  of  government  revenues  over  expen- 
ditures, amounting  ordinarily  to  over  $100,000,000;  but  the  fiscal  year 
of  1891  showd  a surplus  of  only  $37,000,000;  the  next  year  it  was  less 
than  $10,000,000;  for  1893  less  than  $3,000,000;  1894  showd  a deficit 
(customs  receipts  having  fallen  and  expenditures  increast)  of  nearly 
$70,000,000 ; and  1895,  a deficit  of  nearly  $43,000,000.  Along  with  this  re- 
duction in  revenue,  came,  shortly  after  the  passage  of  the  Sherman  Act 
a change  in  the  character  of  the  receipts  from  customs;  in  January,  1891, 
nine-tenths  of  the  receipts  had  been  in  gold  certificates  or  in  gold;  for  the 
last  four  months  of  1892  the  receipts  in  gold  and  in  gold  certificates 
averaged  only  5.6  per  cent  of  the  total  receipts,  the  rest  being  in  green- 
backs, tresury  notes,  and  silver  certificates;  later,  receipts  in  gold  and 
gold  certificates  practically  ceast.  Meanwhile  the  run  on  the  tresury  for 
gold  had  begun.  Grover  Cleveland  called  Congress  together  in  special 
session,  August  8,  1893.  His  message  recited  that  “the  Sherman  Act 
had  operated  to  heap  up  nearly  $150,000,000  more  of  useless  silver  coin 
and  bullion  in  the  tresury,  to  put  out  the  same  amount  of  additional 
obligations  that  must  be  redeemd  in  gold  if  our  silver  and  gold  coins 
were  to  be  kept  at  a parity;  alredy  the  gold  in  the  tresury  had  been 
depleted  to  the  extent  of  $132,000,000;  for  example,  between  May  1, 


Our  Money  History 


35 


1892,  and  July  15,  1893,  $54,000,000  in  tresury  notes  had  been  issued  and 
$49,000,000  in  gold  paid  out  for  their  redemption;  the  purchase  clause  of 
the  Sherman  Act  must  be  repeald  immediately  lest  we  fail  to  main- 
tain the  parity  of  the  gold  and  the  silver  dollar,  lest  we  drop  to  a de- 
preciated silver  currency,  and  lose  our  place  among  the  first  class  na- 
tions of  the  world.” 

Congress  finally  repeald  the  purchase  clause  of  the  Sherman  Act. 
The  rupture  in  the  Democratic  party  that  came  about  during  that 
summer  session  of  1893  has  never  been  successfully  heald.  The  dis- 
continuance of  silver  purchases  and  of  the  issue  of  tresury  notes  did 
not  stop  the  run  upon  the  tresury  for  gold.  There  were  $102,000,000  in 
tresury  notes  and  greenbacks  presented  for  redemption  during  the 
fiscal  year  of  1893,  and  nearly  $85,000,000  during  1894.  The  annual  de- 
ficit was  now  complicating  matters  for  the  tresury.  The  gold  reserv 
on  January  17,  1894,  was  below  $70,000,000,  and  arrangements  were  then 
made  for  the  sale  of  $50,000,000  in  five-per  cent  ten-year  bonds;  anoth- 
er sale  of  the  same  amount  of  similar  bonds  was  found  necessary  in 
November;  the  following  February  3,500,000  ounces  of  gold  were 
bought  from  a syndicate,  with  four  per  cent  thirty-year  bonds,  and, 
finally,  $100,000,000  in  similar  bonds  were  sold  on  popular  subscription, 
early  in  1896.  Dndoutedly  much  of  the  gold  that  paid  for  popular 
subscriptions  of  bonds  was  withdrawn  from  the  tresury  for  the  pur- 
pose. During  the  fiscal  year  of  1896,  the  United  States  notes  present- 
ed for  redemption  aggregated  about  $160,000,000;  the  next  year  the 
amount  was  about  $80,000,000.  Thereafter  the  amount  was  never  great 
enough  to  cause  alarm.  No  further  sales  of  bonds  than  those  describ- 
ed were  found  necessary.  The  election  was  past.  Gold  had  won. 
Foreners  had  ceast  withdrawing  their  investments,  the  hoarding  of 
gold  had  gradually  stopt,  and  the  tresury  deficits  had  become  smaller. 
The  statistics  show  that  of  the  $293,388,061  realized  from  the  four 
bond  sales  during  Cleveland’s  administration  $204,678,893  was  used  to 
meet  deficiencies  in  current  revenues.  Cleveland  in  his  later  messages 
advocated  the  retirement  and  cancellation  of  all  United  States  notes, 
claiming  that  thru  them  the  Nation  had  incurd  a bonded  det  of  $262,- 
000,000,  upon  which  the  interest  would  be  $379,000,000,  making  a total 
of  $641,000,000;  and  the  notes  that  caused  the  catastrophe  would  still 
be  outstanding  and  unpaid,  redy  sometime  to  produce  again  similar 
results. 


36 


The  Normal  School  Quarterly 


The  Campaign  The  silver  controversy  culminated  in  the  memor- 
of  1896.  able  political  contest  of  1896,  in  which  the  Demo- 
crats stood  for  the  free  and  unlimited  coinage  of  silver  at  the  ratio  of 
16:1,  without  any  further  waiting  for  the  cooperation  of  other  nations. 
Their  argument  ran  about  as  follows:  (1)  Gold  monometallism  ment 
an  appreciating  medium  of  exchange.  This  was  evinced  by  the  rapid 
growth  in  population  and  trade,  requiring  a continual  increase  in  re- 
demption money;  by  the  small  per  cent  of  the  gold  produced  that  had 
been  going  into  money  uses;  by  the  stedy  fall  in  the  prices  of  staple 
commodities;  by  the  failure  of  wages  to  rise  since  the  demonetization 
of  silver  in  1873.  (2)  An  appreciating  medium  of  exchange  ment  a 
continual  wrong  to  the  detor  class;  made  all  ordinary  business  un- 
profitable; was  the  surest  and  most  terrible  of  all  ways  to  increase 
the  welth  of  the  rich  and  to  enslave  the  poor;  the  distribution  of 
welth  even  then  was  such  as  to  shock  the  moral  sense  of  any  fair- 
minded  man;  the  richest  one  per  cent  of  the  families  of  the  country 
ownd  more  of  the  welth  of  the  country  than  the  other  ninety-nine 
per  cent  of  the  families  did;  only  seventy  years  before  there  had  been 
but  one  millionaire  in  the  land,  but  now  there  were  six  thousand; 
gold  monometallism  ment  increasing  inequalities  in  the  distribution 
of  welth.  (3)  Bimetallism  would  give  a par  of  exchange  between 
gold-using  and  silver-using  countries,  between  which,  under  existing 
conditions,  trade  was  becoming  little  more  than  gambling  in  the  price 
of  silver.  (4)  Gold  and  silver  combined  would  make  a more  stable 
medium  of  exchange  than  either  alone;  the  tendency  of  the  one  to 
rise  during  any  period  would  very  likely  be  balanced  by  the  tendency 
of  the  other  to  fall.  (5)  Bimetallism  would  work;  the  Latin  Union  had 
long  kept  the  ratio  between  silver  and  gold  very  stedy.  (6)  Bimetal- 
lism would  give  us  a money  in  which  the  prices  of  commodities  would 
remain  about  stationary  and  in  which  the  prices  of  labor  would  rise; 
this  would  give  the  laboring  class  the  benefit  of  a cheapening  cost  of 
production  and  would  too  be  an  ideal  money  as  a standard  for  deferd 
payments,  for  in  it  the  borrower  would  be  paying  back  in  commodities 
just  what  he  borrowd.  (7)  There  was  no  use  waiting  any  longer  for 
an  international  agreement;  if  the  United  States  plunged  in,  it  would 
be  to  the  interest  of  France  and  other  nations  to  follow.  (8)  There 
was  but  little  (free  silver  abroad  with  which  our  markets  could  be 
“flooded.”  (9)  In  settling  trade  balances  the  metals  went  by  bulk; 
coinage  had  nothing  to  do  with  it. 

The  Republicans  stood  in  part  for  gold  monometallisn  and  in  part 
for  bimetallism  thru  international  agreement.  Their  answers  to  the 


Our  Money  History 


37 


arguments  above  were,  in  order,  something  like  the  following:  (1)  and 
(2)  These  arguments  were  wholly  invalid,  because  a medium  of  exchange 
consisting  of  gold  for  redemption  money  and  silver  as;a  coin  of  limited 
x issue,  would  not  be  an  appreciating  currency:  gold  production  had  been 
increasing  and  would  probably  increase  still  more  rapidly;  the  usual 
claims  as  to  the  amount  of  gold  used  in  the  arts  were  grossly  exagger- 
ated; trade  was  coming  to  be  carried  on  more  and  more  thru  checks, 
drafts,  bills  of  exchange,  etc.;  the  fall  in  prices  had  been  due  to  cheap- 
ening cost  of  production  and  was  a good  thing;  real  wages  had  not  fallen 
but  had  stedily  risen;  business  had  never,  upon  the  whole,  been  bet- 
ter, tho  of  course  crises  with  lower  prices  were  bound  to  come  periodi- 
cally; a double  standard,  such  was  the  production  of  the  metals,  would 
surely  mean  a depreciating  money,  a scaling  down  of  dets,  a wrong  to 
creditors,  national  repudiation;  no  sophistry  could  make  this  right.  (3) 
So  far  as  an  international  par  of  exchange  was  concernd,  it  would  be 
better  if  all  leading  commercial  nations  would  use  gold;  gold  interna- 
tional monometallism  was  no  more  impossible  politicallythan  was  inter- 
national bimetallism;  ninety  per  cent  of  our  foren  trade  was  with 
gold-using  countries.  (4)  Silver  was  a discarded  metal;  no  attempt  to 
bolster  it  up  had  been  or  could  be  successful;  if  two  metals  made  a bet- 
ter medium  than  one,  then  why  not  have  three  or  four?  would  not  that 
be  better  still?  (5)  There  was  during  the  experiment  of  free  coinage 
no  concurrent  circulation  at  any  time  in  France;  nor  did  the  ratio  re- 
main unchanged  in  the  markets  of  the  world;  nor  had  there  been  con- 
current circulation  of  silver  and  gold  either  before  or  after  1834  in  the 
United  States  while  the  free  coinage  of  both  existed;  but  whether  bi- 
metallism would  work  or  not  we  wanted  none  of  it,  at  least  without 
international  agreement.  (6)  Was  the  money  suggested  by  the  silver 
man  as  ideal  any  better  than  the  one  we  alredy  had— one  in  which 
prices  of  commodities  had  continually  fallen  with  the  cheapening  cost 
1 of  production,  and  in  which  nominal  wages  had  remaind  the  same  but 
real  wages  had  continually  risen?  Were  not  laborers  thus  getting  the 
benefit  of  inventions,  etc.?  And  was  not  such  a money  just  also  asbe- 
, tween  detor  and  creditor,  since  the  creditor  got  back  only  what  he 
would  have  had  in  commodities  if  he  had  kept  his  money  and  never 
loand  it  at  all?  (7)  Other  nations  would  not  follow;  the  silver  of  the 
world  would  be  dumpt  upon  us,  and  (8)  it  would  be  found  that  there 
was  an  immense  quantity  of  it.  (9)  We  should  be  reduced  commercially 
to  a rank  with  China,  Mexico,  and  other  silver  states.  If  an  interna- 


38 


The  Normal  School  Quarterly 


tional  agreement  among  leading  nations  could  be  reacht,  then  it 
might  do  to  try  the  free  coinage  of  silver  again. 

Our  Money  The  Democrats  lost  in  1896;  they  stood  for  free  coinage 
As  It  Is.  again  in  1900,  and  lost  again;  this  time,  however,  the 
money  issue  was  of  secondary  importance.  The  Democratic  platform 
of  1804  recognized,  what  was  equally  true  in  1900,  that  the  unprecedent- 
ed rise  in  prices  and  the  wonderful  increase  in  gold  production  had  made 
the  free  coinage  of  silver  unnecessary.  The  fruit  of  the  Republican 
victory  of  1896  was  the  Act  of  1900,  which  unequivocally  declared  the 
gold  dollar  to  be  the  unit  of  our  coinage,  sought  to  gard  the  tresury 
against  another  run,  and  favord  the  national  banking  system.  Under 
it  the  tresury  notes  of  1890  are  being  destroyd  as  fast  as  they  come 
into  the  tresury  and  are  replaced  by  silver  certificates;  the  gold  re- 
serv  is  increast  to  $150,000,000  and  the  Secretary  of  the  Tresury  has 
ample  power  to  sell  bonds  if  need  be  to  replenish  it— but  procedes 
from  such  sales  must  not  be  used  to  meet  deficiencies  in  current  rev- 
enues. National  banks  with  a capital  of  $25,000  may  be  establisht 
in  places  of  less  than  3,000  population  ($50,000  had  been  the  minimum 
capital),  they  may  issue  notes  to  the  full  face  value  of  the  United 
States  bonds  deposited  with  the  tresurer  (insted  of  to  90  per  cent  of 
the  face  value,  as  formerly),  and  the  tax  upon  circulation  based  on 
two-per  cent  bonds  is  one-half  of  one  per  cent  each  year  (formerly,  one 
per  cent  tax  on  all  circulation).  Since  the  passage  of  this  law,  over 
3,000  new  national  banks  have  been  started  and  the  national  bank 
circulation  has  about  tripled. 

By  the  Emergency  Currency  Act  of  1908  any  bank  of  a “national 
currency  association”  depositing  a ten  per  cent  redemption  fund  may 
issue  notes  to  a per  cent  of  the  value  of  accepted  securities  other  than 
federal  bonds.  These  are  subject  to  a rising  tax  and  the  issuing  bank, 
the  association,  and  the  Government  are  pledged  for  their  payment. 

General  Stock  of  Money  in  the  United  States 
(in  Millions  of  Dollars) 

Gold.  Silver  Dollars.  Subsid.  Silver,  Greenbacks.  Bank  Notes.  Tres.  Notes 
1,693 565 156 347 725 4 

Most  of  the  silver  dollars  and  much  of  the  gold  is  heapt  up  in  the 
United  States  tresury,  certificates  circulating  insted.  Gold  certifi- 
cates, in  circulation,  $837,000,000;  silver  certificates,  $483,000,000.  All 
these  figures  are  in  round  numbers  and  for  November  1,  1910.  The 
only  minor  coins  now  are  the  cent  and  the  five-cent  nickel  piece. 


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